My question is: Canadian-specific QUESTION: We are considering buying a property in Italy, which we hope to rent out.would appreciate We currently own a house in Canada, and have three years left on our mortgage. My questions are these: 1. What is the best way to finance the purchase of foreign property? 2. What are the tax laws regarding the income on the rental property in Italy? Many thanks, Y ----------------------------------------------------- david ingram replies: I once had a client (whose name would be recognized by everyone in Vancouver) arrested and charged with tax evasion for not reporting income earned in Italy an d the United states form his rentals and bank accounts. Revenue Canada flew in the assistant manager of the Bank of Beverly Hills in California and a senior official of a financial institution in Palermo to testify that my client had business operations and investment income through their institutions. It was total over-kill at the time but the feds got their man. If you buy the rental property, it is taxable in Italy first. You will have to file a non-resident Italian tax return. If there is a profit and you pay tax, you can claim it as a tax credit on your Canadian Return after filling in Canadian Form T776 to report the rental income to Canada. If the property is going to lose money in the short term, you will need a very good cash flow projection showing an eventual rental profit (on an annual basis) to deduct any rental loss caused by interest under the rules of the new bulletin IT 533. http://www.cra-arc.gc.ca/E/pub/tp/it533/it533-e.html Under the new rules which are the same rules I lived with for 40 yeas only codified now, you cannot deduct interest against future capital gain profits. The profit must come from operating income or investment income from the investment or project the original amount (which has generated the interest expense) was borrowed for. It does not matter where you borrow the money as far a s tax laws go. However, because of currency fluctuations, I recommend that you borrow as much as you can in Italy so that the Euros are paid back with Euros. Of course, this will have been BAD advice if the EURO rises more against the Canadian Dollar. In that case, you will have wished that you had borrowed the money in Canada. Happy to look after your tax returns when you make your investment. Answers to this and other similar questions can be obtained free on Air every Sunday morning. Every Sunday at 9:00 AM on 600AM in Vancouver, Fred Snyder of Cartier Partners and I will be hosting an INFOMERCIAL but LIVE talk show called "ITS YOUR MONEY" Those outside of the Lower Mainland will be able to listen on the internet at www.600AM.com Local phone calls to (604) 280-0600 - Long distance calls to 1-866-778-0600. Old shows are archived at the site. This from ask an income tax immigration planning and bankruptcy expert consultant guru or preparer from www.centa.com or www.jurock.com or www.featureweb.com. Canadian David Ingram deals daily with tax returns dealing with expatriate: multi jurisdictional cross and trans border expatriate gambling refunds for the United States, Canada Mexico Great Britain the United Kingdom, Kuwait, Dubai, Saudi Arabia, South Africa, Thailand, Indonesia, Egypt, Antarctica, Japan, China, New Zealand, France, Germany, Spain, Italy, Russia, Georgia, Brazil, Peru, Ecuador, Bolivia, Scotland, Ireland, Hawaii, Florida, Montana, Morocco, Israel, Iraq, Iran, India, Pakistan, Afghanistan, Mali, Bangkok, Greenland, Iceland, Cuba, Bahamas, Bermuda, Barbados, St Vincent, Grenada,, Virgin Islands, US, UK, GB, American and Canadian and Mexican and any of the 43 states with state tax returns, etc. income tax wizard wizzard guru advisor advisors experts specialist specialists consultants taxmen taxman tax woman planner planning preparer of Alaska, Alabama, Arkansas, Arizona, California Denver Colorado, Connecticut, Delaware District of Columbia Miami Florida, Garland Georgia, Honolulu Hawaii, Idaho, Illinois, Indiana Des Moines Iowa Kansas Kentucky, Louisiana Bangor Maine Maryland Boston, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico,New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon. Paris, Rome, Sydney, Australia Hilton Pennsylvania, Rhode Island, Rockwall, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, West Virginia, Wisconsin, Wyoming, British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec City, New Brunswick, Prince Edward Island, Nova Scotia, Newfoundland, Yukon and Northwest and Nunavit Territories, Mount Vernon, Eumenclaw, Coos Bay and Dallas Houston Rockwall Garland Texas Taxman and Tax Guru and wizzard wizard - David Ingram's US/Canada Services US/Canada/Mexico Tax Immigration & working Visa Specialists US / Canada Real Estate Specialists 4466 Prospect Road (Personal residence by appointment only please) North Vancouver, BC, CANADA, V7N 3L7 Calls accepted from 10 AM to 10 PM 7 days a week Res (604) 980-3578 Cell (604) 657-8451 Bus (604) 980-0321 Fax (604) 980- 0325 davidingram at shaw.ca www.david-ingram.com Disclaimer: This question has been answered without detailed information or consultation and is to be regarded only as general comment. Nothing in this message is or should be construed as advice in any particular circumstances. No contract exists between the reader & the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent financial, or real estate planner or advisor & appropriately qualified legal practitioner, tax or immigration specialist in connection with personal or business affairs such as at www.centa.com. -------------- next part -------------- An HTML attachment was scrubbed... URL: http://www.centa.com/CEN-TAPEDE/centapede/attachments/20041003/227c6ca4/attachment.htm
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