Italy – What is the IVAFE foreign assets tax and do I have to pay it?
This tax applies to the total value of financial assets or investments held by Italian residents, in countries outside Italy.
This is not to be confused with the IVIE or property value tax (0.76% on the value of any property you hold abroad).
The 2014 Stability law increased the tax on foreign financial assets (IVAFE) from 0.15% to 0.2% of the value of such assets (or, from 1.5 per thousand for 2013 to 2 per thousand for 2014). However bank accounts held abroad are only subject to a flat €34 Euro in tax where the average annual bank balance exceeds €5,000.
The 0.2% tax applies on all other financial investments, for example bonds, shares, derivatives, term deposits, gilts, and ISA-held investments, etc (this is a non-exhaustive list). There is a maximum tax payable limit, of €14,000.
The tax is also due for foreign investments in the name of companies or other legal entities, if such structures are acting as “mere intermediaries” allowing the individual resident in Italy to have the control of or effective availability of the investments (as per the Agenzia delle Entrate circular 28/E of 2012). The value taxed is the market value of the investment at the end of the tax period or period of ownership if sold. The payment of the IVAFE like most taxes requires two advance payments during the year and the balance by 16 June of the year following the tax year in question.
Italy residents need to declare their foreign assets via the schedule (Quadro) RW of the Unico form and your commercialista can attend to this annual filing. Foreign bank accounts whose maximum value exceeds €10,000 at any point during the year, needs to be declared in the Quadro RW, from tax year 2014.
Avoiding the declaration of assets will likely lead to penalties, the rate of penalty depends on where the assets not declared are held. For example in a “white list” country, which is a country which has agreed an information exchange with Italy (e.g. the UK) penalties range from 3% up to 15% of the value of the assets not declared. For “blacklist countries” (e.g. Jersey) the penalty can range from 6 to 30% of the asset values.
Ensure your foreign asset declarations and tax payments are up-to-date and you won’t need to be concerned with penalties or the consequences of not declaring. Look out for my upcoming article about a new voluntary disclosure initiative about to be released for taxpayers in Italy.