From 2010 until the end of 2015 I lived in Slovenia and was tax-resident there. During this time I had 3 rental properties in England, one being my main UK home. I declared rental income to HMRC but paid no tax because the mortgage interest was higher than the rents, i.e I made a loss.
In 2015 Slovenia started taxing its residents on their worldwide income. HMRC informed the Slovenian Tax Office of my UK rental income which thus became taxable in Slovenia. This would be OK normally, because The tax paid in UK would be offset against the Slovenian tax. However, in Slovenia, mortgage interest is not subject to any tax relief, so I will be taxed on my actual rental income, less property maintenance type expenses. This will give me a tax bill of about £3,500.
I have read the section in the Dual Taxation Convention about income from property, which I interpret as saying such income is only taxed in the country where it is. There is a further section that seems to say that a taxpayer should not be taxed more unfairly on foreign income, than a resident of that other country. The language is obtuse, however, and the Slovenians obviously interpret it differently!
Does anyone have accurate information about this? I haven't yet received the tax bill but I am preparing in case I can appeal.
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