Luca: I read all the time about people that don't want to come to Italy because of the wealth tax. There was this lady that wrote on Expats in Italy, the Facebook group, that she wouldn't come to Italy because she had calculated that the wealth tax would exceed her annual salary.

Anna: Oh my God.

Luca: Yeah, it's, it's not true. So that's how the idea for this podcast came about.

Let's start with this complex, uh, and scary subject, in, under 15 minutes.

Anna: However, and welcome back to the Magic Towns Italy podcast. I am Anna here with my co-host Luca, and today we're talking about a topic that causes a lot of confusion and worry for internationals in Italy, which is the so-called wealth tax on money held abroad.

Luca: [00:01:00] Yes. This is a topic that a lot of people ask about and there is a lot of misinformation about. So we have to tackle this. People are scared by a term like wealth tax and we're here to clear the air with facts and um, try to make it interesting in under 15 minutes.

Anna: We'll break down what Italy's, foreign wealth tax, really is, uh, talk about, you know, the common myths and give you a few examples so you can understand everything better.

Luca: By the end of today's show, you will know that the idea of a huge Italian wealth tax is a myth. What the actual numbers are and what kind of assets are exempt from this tax. And we'll also give a few examples I like this one how having 5 million euro or dollars in a foreign bank account could result in a tax that's cheaper than than dinner for two.

Anna: Okay, so, uh, one thing I've heard over and over is [00:02:00] that if you keep money abroad or transfer money into Italy, the government will whack it with a 10% or 20% tax. Is there any truth to this?

Luca: The quick answer is no. There is no generic 10 or 20% remittance tax on money that is sent to Italy. There is no automatic haircut on incoming funds. In 2014, there was a shortlived, government proposal. This was like three governments ago, of course.

But the proposal was basically dead as as soon as it was discussed. This came up in the, uh, years after the great financial crisis when Italy had a, uh, like many other European countries of a huge debt problem, and they were trying to shore up their finances. Anyway, for people listening to this in 2026, it is absolutely untrue that Italy will tax, or the Italy will intercept even a single euro of money coming from abroad.

Anna: Okay, so if I move, [00:03:00] say, 50,000 euros of my saving from my home country to my Italian bank, I won't wake up to find 10,000 missing. Right?

Luca: That's exactly right. You're going to wake up and find 50 K in the bank account. What is more, if those 50k are your savings that are already taxed, uh, Italy doesn't tax the fact that you moved them or the fact that you have it. There's no tax on savings per se.

Anna: Okay. That is a huge relief for a lot of listeners, I'm sure. People in expat forums always panic about some mysterious wealth tax.

Luca: Absolutely. As a myth, it is a remarkably sturdy one. So let's clarify this. Italy levies a wealth tax on foreign assets, so on cash and financial instruments held abroad. The taxes name is IVAFE. You don't need to remember the acronym, but it translates to tax on the value of foreign financial [00:04:00] assets.

And this is what people are actually talking about when they mention a wealth tax on money kept abroad.

Anna: Okay, so let's talk like more deeply about that. Like what is it, how much is it, why Italy has it, like how much is this tax actually?

Luca: Let's start with that. So the wealth tax covers financial assets held abroad by Italian tax residents, think bank accounts, stocks, bonds, crypto, mutual funds. Basically financial instruments held outside Italy. If you're an Italian tax resident. Italy wants to know about what you have, and there's a very small tax that you have to pay each year.

The headline rate for this tax is 0.2% of the value of those assets per year. That's two tenths of 1%. And let me put this in even clearer terms. If you have 10,000 euro in foreign investments, [00:05:00] 0.2% is 20 euro per year. If you have a hundred thousand Euro held abroad, that's 200 euro a year. Even if you had a million euro of financial assets and these were not exempt for the tax. I'm gonna look at a whole bunch of exemptions. Then the tax you have to pay is 2000, right? 2000, over a million. So these are pretty small numbers.

Anna: Yeah, honestly, hearing wealth tax, I thought it would be much higher

Luca: yeah, Italy isn't really trying to bankrupt anyone with the tax. It's more about, uh, monitoring what people have. And the thing is that Italy already has this kind of tax on financial investments kept in Italy. It's not trying to punish foreigners that come live in Italy.

It is just leveling the playing field between assets held in Italy, assets held abroad with, as I say, pretty small tax.

Anna: Okay, so what about like real estate abroad? Is that part of, this tax [00:06:00] or is it separate?

Luca: Yeah, real estate is not part of this tax. It has its own tax, which is called IVIE, um, which is roughly 1% of the property's value. We should probably do an episode on that. Further on it is also not scary, but because it has a million exemptions of its own, we're not gonna dive deep into it. Our focus today is on the so-called wealth tax that hits financial products only.

Anna: So IVAFE is just money stuff at 0.2% and a 0.2, not 20%. You think that something so small wouldn't cause so much confusion, but it does. However, there's even smaller tax scenario we need to talk about, and that's for bank accounts. So, I've heard something about a flat fee on bank accounts, not a percentage.

Luca: That's what I was referring to earlier when I mentioned that someone could have 5 million euro in a bank account and pay a dinner's worth of tax for holding that cash.

Basically foreign bank [00:07:00] accounts. Savings accounts are treated differently from other financial assets under this wealth tax. You're not even charged. 0.2%. You have to pay 34 euro and 20 cents per account per year. That's about 40 US dollars. If you as an Italian tax resident have a checking or savings account abroad, it is not going to tax zero for 2% on it.

This is a very common misconception. You could have a 10 million Euro, a hundred million euro in a bank account. You're still only get going to get charged 34 euro and 20 cents per year.

One more thing. There is a threshold. If the account has less than 5,000 euros balance over the course of a year on average, then you don't even have to pay the 34 Euro 20 cents. It is completely exempt.

Anna: Let's have another example. So suppose someone has a foreign bank account where they keep a rain day fund. So one [00:08:00] person has, 6,000 euros in it. Another one has, 600,000 and another one extremely cautious person has six millions. How does this tax apply to each?

Luca: Um, it applies in the same way. They all pay 34 euro or $40 roughly per year.

Anna: So someone with 5 million in a bank abroad pays the same wealth tax as someone with, 5,000, uh, euro?

Luca: Ja.

Anna: I can

Luca: It's not, it's not that scary, right?

Anna: No, I mean, 34 euros won't even buy two pieces and drinks in many places these days.

Luca: Now the 34 euro is per account. So if you have, several accounts, that total over 5,000 euro each, then each one has to be charged 34 euro, but still tiny.

Anna: This is so good to know.

Luca: Ja.

Anna: a lot of listeners are shocked that the wealth tax on, say, a decent chunk of savings [00:09:00] is so low. It really flips the narrative.

Luca: Now let's close this off by mentioning a few exceptions, uh, and, uh, special cases because, uh, not everything gets taxed, and even the small zero point percent tax doesn't get applied to everything.

Anna: Yeah, I'm sure some listeners are wondering like, okay, they will tax my bank account or portfolio, but what about my foreign pension? Or what if I own part of a, I don't know, a company abroad, are those taxed too?

Luca: These are two very good questions and those are two, important exemptions. Let's start with foreign pensions. Very relevant to anyone that has a 401k an IRA a UK Pension Fund. A SIPP. These pension schemes are exempt from the wealth tax. The talent tax authority specifically exclude them.

So if you have, uh. Million pounds on your UK SIPP. Or if you have $3 million in your [00:10:00] US 401k, you don't have to fork over a single penny for having them. You still have to declare that you have them, but you don't have to pay any tax on them.

Anna: That's fantastic to hear. So for example, if I moved to Italy with a UK private pension fund value, let's say 200,000, I wouldn't be paying, 0.2% on that each year.

Richtig.

Luca: Oh, you'd be paying nothing, uh, on each year on that pension pot. Of course, when you draw income eventually from that pension. It is likely that that income would be taxed unless you under one of the special regimes. But there is no wealth tax on it. And while we're talking about that, the 7% tax regime as well as the 300,000 euro flat tax regime for wealthy individuals both exempt you from the wealth tax on assets. So you don't even have to pay the 0.2% tax even when it is [00:11:00] due.

You also asked about owning a private company abroad. Let's say that you are a business owner, right? You have a, you know, company in Germany, a chain of lauderettes worth several million euro. How much wealth tax are you going to pay on those holdings?

The answer is nothing because the wealth tax applies to only, only to financial investments like shares, but only publicly traded shares are taxed then.

So if Mark Zuckerberg were to move to Italy and he had, as he does, billions of dollars worth of Facebook shares held in his own name. Then, he would probably have to pay 0.2% of those because Meta, the Facebook holding company is a publicly traded company.

Uh, although to be fair, Zuckerberg will probably move on the 300k flat tax scheme, so he don't have to even pay that, but that aside. If instead you own shares of a [00:12:00] private company, then you have to pay anything at all. You just have to declare the fact that you are, uh, the owner or part owner, of such company.

Anna: Really. So if I have, for example, like 50% ownership in a private company back in the States, I do have to declare it on my tax form. But I wouldn't pay the 0.2% annual wealth tax on the value of that stake.

Luca: You don't have to pay the tax, so you have to report it. But when you have to calculate the wealth tax, then you would mark that is not subject to the tax. And that is because this quote unquote wealth tax only applies to financial products that are held in your name only.

So if you have shares in a private company, those are not, taxable.

Anna: That's a great exemption, especially for entrepreneurs or people with family businesses abroad.

So what about other odd assets, for instance, crypto as being a hot topic.

Luca: Yes, [00:13:00] Italy has clarified recently that crypto holdings are foreign financial assets too, so they do fall under the wealth tax at 0.2%.

Anna: So let's recap the exemptions in plain English. So, foreign pensions, no wealth tax. Private foreign companies, no wealth, tax assets held via Italian institutions, no wealth tax, special tax regime, folks, like the 7% flat tax, no wealth tax. And normal bank accounts under 5K, no wealth tax, right?

Luca: Well done Anna honestly, you are becoming an accountant almost.

Anna: Thank you. So what if someone didn't know any of this? Let's say an expat moves to Italy, doesn't realize they have to be clear their foreign bank account and they don't pay IVAFE for a few years. What are the consequences if the tax authorities find out?

Luca: Italy's tax authorities do check about this. I [00:14:00] do know of people that have been caught not because they meant anything bad just because they forgot. With international data sharing these days, the countries where you have parked your cash and assets are going to report to Italian government once a year, if not more often.

And if you fail to declare there are penalties, there are two penalties. For not declaring the asset each year, the fine can be up to 3% of the asset value per year of omission. So if you forgot to declare that million dollars held abroad, then you could be potentially charged $30,000. I. I think it's best if that doesn't happen and for not paying the tax, they can also levy a penalty.

So let's say you declare it, uh, or you don't pay the tax or you don't do all things, the penalty can be 30 to a hundred percent of the unpaid tax. That said, I don't want people to feel scared about [00:15:00] this. Italy's taxman allows you to, uh, do a voluntary disclosure whenever you want about any tax you may have forgotten to, uh, pay, or any assets you may have not declared.

So if you have not been served a notice yet you can talk to your, accountant about the fact that you have not disclosed it, then you can normally, disclose at a later date by paying a small penalty.

Anna: Yeah, so the moral is don't ignore it just because it's small. In fact, the smallness of the tax is exactly why you just pay it. It's

Luca: Ganz genau.

Anna: those big fines. Yeah.

Luca: Don't lose your sleep over a few tens or hundreds of euros a year. Enjoy your life you need to do and avoid headaches. And the last thing I wanna say is that certain blacklisted tax havens are charged at a higher rate. So for instance, if you hold assets in a Panama Bank, uh, or in the British [00:16:00] Virgin Islands or other tax havens, then it Italy charges you to just 0.4% on those assets, not 0.2.

Anna: So hearing all of this, I really feel the term wealth tax is almost misleading. Like it's more like a symbolic tax or alignment tax

Luca: I think that's fair. A lot of Italians don't know that this tax even exists. In fact, when you say a small source of revenue, you're absolutely right. The Italian taxman does not disclose how much the wealth tax. It generates for them, but I managed to get my hands on some internal documents from 2021 that showed that it generated about 0.002% of the total tax intake for that year. And don't forget that this includes money, not just paid by foreigners who live in Italy, Italy, but also Italians that have financial products that are located abroad who are probably a lot more people. You could ask yourself, is it worth scaring off, uh, thousands of potential Italian residents to make so little [00:17:00] money?

Probably not. It's always like, like this with Italy. But until the Italian government realizes that, um, it is such a bad publicity for the country, then we're gonna have to deal with the wealth tax by declaring our assets abroad and paying it.

Anna: So we hope this chat was useful. And for those who want to learn more, we'll put some links in the show notes.

Luca: Yes. And if this was useful to you and if you enjoyed the episode, please subscribe, share with your friends and it would be very nice if you left us a review. If you're on Apple Podcasts or Spotify, just tap the review button. It takes 20 seconds and make us very happy to know what you think about the podcast, especially if you like it.

Anna: Yeah, thank you guys..

Luca: Thank you everyone. We'll talk next week. Bye.