UK tax on sale of Italian shares

UK tax on sale of Italian shares

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We have a UK resident but Italy-domiciled client. He has shareholdings in a number of Italian private companies. These shares are likely to be sold just after Christmas. He will be subject to UK CGT on these sales. Apparently, in Italy, and before the client became a UK tax resident, these shares were subject to a government initiative whereby they were revalued to the then market value and Italian CGT paid on the revaluation. The rate of Italian CGT paid was much lower than the usual rate: I imagine the idea was to advance income to the cash-strapped government in return for a lower tax charge.

When the shares are sold, what will the base cost be in the UK - the original cost or this revalued amount? Will the Italian CGT paid on the revaluation be available as a credit against UK CGT? 

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By User deleted
24th Nov 2015 10:28

I'd say UK tax to be calculated on the basis of UK law which, depending on the full facts, would suggest actual cost as the starting point. Double tax relief would be available subject to what the DTA provides.

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By pawncob
24th Nov 2015 12:21

I guess you like cake

You can't have your cake and eat it, so whichever one you choose excludes the other.

I'd opt for the UK position as Phil suggests BUT check on the actual Italian tax position. The UK revalued CGT base in1982 and the Italians may have done the same thing at some time. I don't think the DTA allows for a deduction because there wasn't a disposal.

 

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By ChrisMartin
25th Nov 2015 07:52

Thanks for these comments

The original base cost seems logical, or we'd be forced to allow relief for any Mickey Mouse tax tweaks introduced by other jurisdictions. It seems unduly harsh not to give credit for the tax paid though (it was 8% apparently).  

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