Becoming tax resident in Italy brings new obligations towards the Italian tax authorities regarding assets held abroad. Foreign bank accounts, real estate and investments must be disclosed and, in some cases, may also be taxed. Below we look at what changes, how the RW form works, which taxes may apply and how to put things right if a mistake occurs.
Foreign accounts and assets: what changes when you become tax resident in Italy
Anyone who transfers their tax residence to Italy soon discovers that their relationship with the tax authorities changes significantly.
From that moment onward, the taxpayer becomes subject to Italian taxation on income earned anywhere in the world, according to the principle of worldwide taxation, rather than only on income sourced in Italy.
Alongside this principle are two obligations that directly affect those who own assets outside Italy.
The first is the monitoring of foreign assets, namely the obligation to disclose foreign bank accounts, real estate and investments to the Italian tax authorities. The second is the payment of wealth taxes on foreign assets where applicable.
This system is not intended to penalise individuals moving to Italy. Rather, it aims to ensure transparency and traceability of wealth, in line with the automatic exchange of financial information now widely adopted by tax authorities around the world.
For new residents, the greatest risk lies in ignoring these obligations. Foreign assets are no longer invisible to the tax authorities. Numerous countries now automatically exchange information concerning bank accounts and investments held by non residents, and Italy receives such information from participating jurisdictions.
The good news is that these obligations are entirely manageable provided they are understood in advance.
Assessing your foreign assets from the first year of Italian tax residence, distinguishing between assets that must simply be reported and those that are also subject to taxation, makes it easier to complete your first Italian tax return correctly and avoid mistakes that could later prove costly to correct.
Discussing these issues with your adviser as soon as you relocate is the most effective way to begin on the right footing.
The RW form: what it is and who must complete it
The instrument through which foreign asset monitoring is carried out is the RW section of the Italian tax return, referred to in some tax return models as the W section.
This is the part of the tax return where resident taxpayers report foreign investments and financial or patrimonial assets held abroad.
Italian tax resident individuals who own foreign assets, whether through ownership or another real right, must complete this section regardless of how the assets were acquired.
Since 2020, the obligation has also extended to certain non commercial entities and simple partnerships resident in Italy.
The relevant criterion is tax residence rather than nationality. As a result, foreign nationals who establish tax residence in Italy are equally subject to the reporting obligation.
One frequently overlooked aspect is that the obligation does not apply only to the formal owner of the asset.
It also extends to individuals who have authority over the assets or the ability to operate them, such as a person authorised to manage a foreign bank account.
Where an asset is jointly owned, each owner must report the full value of the asset while indicating their respective ownership percentage.
There is only one reporting threshold that should be remembered. For foreign current accounts and bank deposits, the monitoring obligation does not apply if the maximum aggregate value during the year never exceeds EUR 10,000.
However, the RW section must still be completed if foreign wealth taxes are due, as discussed below.
Outside this limited exception, the general rule is simple: foreign assets should be reported.
What must be declared: accounts, real estate and investments
The most common question asked by individuals relocating to Italy concerns which assets must actually be disclosed.
The rule is broad. Foreign bank accounts and, more generally, all financial investments and assets of a financial or patrimonial nature held outside Italy must be reported.
From a financial perspective, this includes current accounts, savings deposits, securities accounts, interests in foreign companies, investment funds, bonds and other forms of investment, including certain insurance policies.
These assets must be reported together with their value and ownership percentage, even where the amounts involved are relatively modest, except for the limited threshold applicable solely to foreign current accounts.
Cryptocurrencies and other digital assets held abroad are also generally included among the assets subject to monitoring obligations.
From a patrimonial perspective, the most common example is foreign real estate, which many new residents continue to own in their country of origin.
Such properties must also be reported, together with other valuable assets held outside Italy.
The purpose of the reporting requirement is to provide the Italian tax authorities with a complete picture of the taxpayer’s foreign wealth.
It is important to distinguish between two separate concepts.
Reporting through the RW section serves a monitoring function and is required regardless of whether the asset generates income.
Any income produced by foreign assets, such as rental income, interest or dividends, is instead subject to the ordinary tax rules, including the possibility of claiming relief for taxes already paid abroad.
Keeping these two concepts separate helps explain why an asset may need to be declared even if it produced no income during the year.
IVIE and IVAFE: taxes on foreign assets
In addition to monitoring obligations, the taxation of foreign assets owned by Italian residents includes two specific wealth taxes that are levied on the value of assets rather than on the income they generate.
These are IVIE, which applies to foreign real estate, and IVAFE, which applies to foreign financial assets.
Both taxes are annual and are calculated proportionally to the period and percentage of ownership.
IVIE is the tax on the value of real estate located abroad. It is payable by Italian resident individuals who own foreign property or hold a real right over it.
As of 2024, the ordinary rate is 1.06 percent of the property’s value. No payment is due where the total tax liability does not exceed EUR 200.
IVAFE applies to foreign financial assets.
For financial products, the tax is generally equal to 0.2 percent per year of the asset’s value.
For current accounts and savings deposits, a fixed annual charge of EUR 34.20 applies to each account relationship. This charge does not apply where the average annual balance does not exceed EUR 5,000.
Both taxes are calculated through the same RW section, which therefore performs a dual function, namely monitoring foreign assets and calculating wealth taxes.
Because rates and thresholds may change over time, it is always advisable to verify the applicable rules for the relevant tax year and to rely on a tax adviser for accurate calculations.
Where a comparable wealth tax has already been paid abroad on the same asset, a tax credit may be available under certain conditions, reducing the Italian tax burden.
Penalties for failing to declare foreign assets
Understanding the consequences of non compliance helps place the proper importance on these obligations.
Penalties relating to foreign assets operate on two separate levels, corresponding to the two obligations discussed above: monitoring requirements and wealth taxes.
Regarding monitoring obligations, failure to report foreign assets in the RW section triggers penalties ranging from 3 percent to 15 percent of the value of the undeclared assets.
The penalties double, ranging from 6 percent to 30 percent, where the assets are held in low tax jurisdictions traditionally referred to as black list countries.
These penalties are calculated on the value of the undeclared assets rather than on the amount of tax due, which explains why even assets generating little or no income may result in substantial penalties.
As regards wealth taxes, failure to declare or incorrectly calculate IVIE or IVAFE is subject to the penalties applicable to inaccurate tax returns, based on the additional tax due.
The two aspects are independent. Consequently, a single omission may trigger penalties both for failure to report the asset and for failure to pay the related wealth tax.
In more serious cases, the period during which the tax authorities may carry out assessments can also be extended.
These figures should not be viewed with alarm but rather as a reason to approach the subject seriously.
In the vast majority of cases, omissions arise from lack of information rather than any intention to evade tax. For this reason, Italian law provides mechanisms for correcting mistakes, as discussed below.
In any event, understanding the rules is the best safeguard against unintentional errors.
How to become compliant
Individuals who realise that they have failed to declare foreign assets, or have done so incompletely, can generally correct their position through the procedure known as voluntary correction (ravvedimento operoso).
This allows taxpayers to regularise their situation spontaneously while benefiting from reduced penalties.
In practice, the taxpayer submits an amended tax return electronically and pays any additional tax due, together with interest and reduced penalties, using the prescribed payment forms.
The earlier the correction is made, the greater the reduction in penalties. Acting promptly and voluntarily is therefore always advisable.
It is important to remember that voluntary correction remains available only until the violation has been formally challenged by the tax authorities.
In some cases, the Italian Revenue Agency may itself encourage taxpayers to review their position by sending so called compliance letters, communications inviting them to verify the accuracy of their tax reporting.
Even in these circumstances, voluntary regularisation remains possible and is generally in the taxpayer’s best interest before the matter develops into a formal tax assessment.
For new residents with significant foreign assets, the message is straightforward: these obligations are entirely manageable if approached methodically and in good time. These are precisely the profiles we assist most often: the American pensioner who moves to Italy while keeping a home in Florida and accounts in the United States, or the Gulf family with a financial portfolio spread across several countries. In such cases, what makes the difference is order: understanding from the very first year what must merely be monitored in the RW section and what is also subject to IVIE or IVAFE, and avoiding omissions that carry over from year to year.
This is the ground on which we work as a firm: we coordinate the legal analysis of the position with the work of the tax adviser responsible for calculations and returns, so that clients achieve compliance with confidence and experience their move to Italy without fear of future surprises. Even longstanding irregularities, in our experience, can be brought back into compliance with the right guidance, often with reduced penalties through voluntary correction.
