If you are thinking about moving to Italy in order to become a Tax resident of that country, you need to consider that your Foreign Financial and Real Estate Assets are respectively subject to the Italian Wealth Taxes IVAFE and IVIE. Let’s take a quick look at the essential elements of these two Wealth Taxes here below.
What is IVIE and Who Must Pay It?
The IVIE (Imposta sul Valore degli Immobili Esteri – Foreign Property Value Tax) is a tax imposed on Italian residents who own real estate abroad. The tax rate is set at 1.06% of the property’s value (until 2023, the rate was 0,76%).
How is the Property Value for IVIE Calculated?
The value used to calculate IVIE depends on the country where the property is located:
- EU/EEA Countries: The cadastral value as determined and reassessed in the country where the property is situated.
- Other Countries: The purchase price from the acquisition deed or, if unavailable, the market value.
It is strongly recommended to review the Circolare n.28/E of 2 July 2012 of the AGE (in Italian) for guidelines about how to determine the taxable base according to each country.
N.B. French Real Estate Property: The Italian Tax Administration does not consider that France adopts an Italian-equivalent cadastral value to serve as basis for calculating the IVIE Tax. However, the Tax Administration allows the French “Valeur Locative Cadastrale” to be taken into account as basis for calculating the IVIE Tax. This value is shown in the French “Avis de Taxe Foncière” (corresponding to the Italian IMU) and serves as the basis for the Taxe Foncière, after a deduction of 50%. This last value shall then be multiplied for the applicable Italian IMU coefficients and serve as basis for calculating the IVIE Tax.
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CONTACT USWhat if the IVIE Amount is Less Than 200€?
If the total IVIE Tax amount is less than 200€, no payment is required. In this case, the taxpayer is not obligated to report the property details in the RM section of the tax return, though the RW section shall be completed anyway.
What is IVAFE and Who Must Pay It?
The IVAFE (Imposta sul Valore delle Attività Finanziarie Estere – Wealth Tax on the Value of Foreign Financial Assets) is imposed on Italian residents holding financial assets abroad, including corporate shares, bonds, financial instruments as well as checking and savings bank accounts. The tax rate is 0.2% of the market value of financial assets and accounts balance, with a fixed rate of 34.20€ for each checking and savings account.
For checking and savings accounts whose balance is under 5.000 € the IVAFE Tax does not apply.
Are There Deductions or Tax Credits for IVIE and IVAFE?
It is possible to deduct foreign property taxes from the IVIE liability. For properties in EU/EEA countries, taxpayers can also deduct any excess foreign income tax not used as an IRPEF* credit. Similarly, for IVAFE, a tax credit can be claimed for similar taxes paid abroad.
N.B. for French Real Estate and Financial Assets —> From the IVIE Tax are deductible the Taxe Foncière, the IFI as well as any remaining tax credit for Real Estate Income Taxes paid in France. As to the IVAFE Tax, no Tax credit applies since according to article 23, par. 4 of the French-Italian Double Tax Agreement, there is no Wealth Tax in France on the Financial Assets held by an Italian Tax resident.
*Italian Personal Income Tax
Reporting Obligations for IVIE and IVAFE
Taxpayers must declare foreign properties and financial assets in the RW section of the Italian tax return form (Modello Redditi PF or Modello 730). The tax payment follows the same rules as IRPEF, including advance and balance payment dates.
For more detailed information and official guidelines, you can refer to the official pages about IVIE and IVAFE on the Agenzia delle Entrate website and reliable resources such as Fiscomania and FiscoOggi (Agenzia Entrate) as well as Fisco e Tasse.
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VAT Strategy And Corporate Restructuring
Do not hesitate to contact us in order to clarify your situation on these issues; we will be happy to help you.
CONTACT USThe opinion expressed in this article is for informational purposes only.
This article does not constitute legal advice.
In addition, it is important to remind that each client’s tax issue is different because each client’s personal situation is different.
Should you have a similar tax issue, please contact us for an initial discussion of your case.