Work in Italy: Taxes on Property and Wealth

In our last post, we talked about income taxes and contributions. In this one, we'll discuss another type of tax not directly related to work but applicable to tax residents in Italy: Taxes on Property and Wealth (Wealth Taxation).

What are Taxes on Property and Wealth (Wealth Taxation)?

These taxes apply to everything an individual owns that has financial value. Real estate, investments, money, etc. In Brazil, Property Taxes typically refer to taxes on real estate, such as IPTU, ITR, IPVA, among others. In Italy, in addition to taxes on real estate, non-real estate assets such as investments and balances in current and savings accounts are also taxed.

Taxation of Property and Wealth held abroad (outside Italy)

Since 2012, Italy has introduced taxation on Property and Wealth held abroad by Italian tax residents. This means that once an individual establishes themselves in Italy and becomes a tax resident according to the criteria we have previously discussed in posts, taxes will apply to everything that person has, including real estate, balances in current and savings accounts, and investments anywhere in the world.

There are two taxes applicable to assets held abroad: IVIE (Imposta sul Valore Immobili Esteri - Tax on foreign real estate values) and IVAFE (Imposta sul valore delle Attivita Finanziarie detenute all'Estero - Tax on the value of financial activities carried out abroad).

IVIE - Tax on foreign real estate values

IVIE is an annual Real State tax, charged at 0.76% of the property's acquisition value or the base value used by the country of the property for tax calculation. However, applying this tax depends on the property's location (EU, EEA, or other countries).

IVAFE - Tax on the value of financial activities carried out abroad

IVAFE is an uncommon tax for Brazilians, charged on everything an individual owns in financial value outside Italy (balances in current and savings accounts, bank investments, government bonds, cash, etc). In Brazil, investments are subject to taxation on the income values within the year, while in Italy, such taxes also apply to the balance of the asset.

For example, if a resident has 20,000 euros in a savings account in Brazil, IVAFE will be applied to that balance value, not just to the interest earned on that savings account throughout the year. Taxes on investment income will be accounted for as Income Tax, while the balance will be taxed as IVAFE.

Here are the tax rates:

Balances in Checking Accounts, only when the average balance throughout the year exceeds	Fixed-rate of 34.20 Euros per year.
Investment balances as of 31/12/2023 (savings, stocks, funds, etc.)	0,2%

Let's see an example: A tax resident in Italy owns an apartment in Brazil valued at 60,000 Euros, has 6,000 Euros in a current account, and 20,000 Euros in various investments.

Asset	Tax Rate	Tax Amount in Euros
Real State property (60,000 Euros)	0,76%	456
Checking Account (6,000 Euros)	Flat	34,20
Investments (20,000 Euros)	0,2%	40

Attention: Bilateral agreements between Italy and the country of the asset are applicable to avoid double taxation. Research the existence of such agreements to understand the general context of your case.

Payment of IVAFE and IVIE

Declaration of such assets must be made by the end of September, and payment follows the Income Tax schedule, with payments in June and November each year. By law, when a tax resident, all assets and investments held outside Italy must be declared, even if no tax amounts are applicable.

In our upcoming posts, we will continue to provide more information for those seeking to establish themselves in Italy.