What Is the Wealth Tax in Italy for Foreign Assets?
For Italian tax residents, holding assets outside of Italy creates specific tax and reporting duties. Learn how this system works for property and investments.
Italy imposes two wealth-style taxes on foreign assets held by Italian tax residents: the Imposta sul Valore degli Immobili Esteri (IVIE) for real estate, and the Imposta sul Valore delle Attività Finanziarie Estere (IVAFE) for financial assets. These taxes are calculated and paid annually as part of an individual’s income tax return. The purpose of these taxes is to encourage residents to invest within Italy rather than abroad.
Determining Who is Subject to the Tax
An individual’s liability for these taxes depends on their status as an Italian tax resident. A person is considered a tax resident if they meet any of the following conditions for more than 183 days in a year:
- Are physically present in the country.
- Are registered in the Anagrafe, the official registry of the resident population.
- Have a “domicile” in Italy, defined as the principal center of one’s business, economic, and personal interests.
- Have a “residence” in Italy, meaning their habitual abode or where they customarily live.
Meeting just one of these criteria is sufficient to be classified as an Italian tax resident for the entire year. This means that having Italy as the core of one’s economic and family life can trigger this tax obligation, regardless of citizenship.
Tax on Foreign Real Estate (IVIE)
The Imposta sul Valore degli Immobili Esteri (IVIE) is a tax on the value of real estate located outside of Italy owned by Italian tax residents. The standard IVIE rate is 1.06% of the property’s taxable value, which applies from the 2024 fiscal year onward.
The tax base follows a specific hierarchy of valuation methods. The primary method is the cadastral value or an equivalent value used for property taxes in the country where the real estate is located. If such a value is not available, the next accepted valuation is the original purchase cost of the property. The final option is the current market value of the property. If the total IVIE liability for all foreign properties is less than €200, no payment is required.
Tax on Foreign Financial Assets (IVAFE)
The Imposta sul Valore delle Attività Finanziarie Estere (IVAFE) is the corresponding tax for financial assets held abroad by Italian residents. This tax covers a broad range of investments, including stocks, bonds, life insurance policies, and investment portfolios managed by foreign entities.
The standard tax rate for most financial investments is 0.2% of their market value at the end of the calendar year. This rate increases to 0.4% for financial products held in countries considered to have privileged tax regimes. For foreign bank and postal accounts, a fixed annual amount of €34.20 is due for each account. An exemption exists for foreign bank and postal accounts with an average balance below €5,000 for the year. Certain foreign pension plans may also be exempt from IVAFE.
Declaration and Payment Process
The declaration of foreign assets and payment of IVIE or IVAFE is managed through the annual Italian income tax return, the “Modello Redditi Persone Fisiche.” Taxpayers must use the “Quadro RW” section of this form to provide a detailed list of all foreign-held real estate and financial assets, regardless of whether a tax is ultimately due.
Payment deadlines for IVIE and IVAFE align with those for the main income tax, with payments due in June or July of the year following the tax year. To prevent double taxation, a tax credit is available for any wealth or property taxes already paid on the same assets in the foreign country. This credit is claimed on the Quadro RW form and cannot exceed the amount of the Italian tax due. Proper documentation of foreign taxes paid is necessary to claim this credit.