Repent, pay and you will be forgiven.
Every year, the RW box in the Italian Annual Income Tax form needs to be completed by those Italian residents who hold foreign assets.
IVIE tax (imposta sugli investimenti immobiliari all’estero) is applied to real estate and an IVAFE tax (imposta sul valore delle attività all’estero) applied to financial products.
For a second property held abroad the IVIE tax is currently equivalent to 0.76% of the value or 0.4% if the property is the owner’s first home.
The taxpayer is IVIE exempt for tax calculated to be no higher than 200€ but importantly the RW still needs to be compiled for tax monitoring purposes.
For financial assets the IVAFE tax is equivalent to 2/1000ths of their value apart from current and savings bank accounts which incur a flat tax of 32.4€ payable for each account held.
Some financial products, such as those life insurance policies which are registered in Italy and recognised by the Italian tax authorities but where the beneficiary’s assets are being managed abroad, do not incur IVAFE tax but still need to be declared for monitoring purposes.
The need to declare or not to declare depends on whether the company that issued the insurance policy is regulated in Italy according to the EU Freedom of Establishment (no need to declare) or EU Freedom of Services (need to declare).
Exchange of information between financial institutions is increasing worldwide and Italy’s tax authorities increasingly use the RW to monitor annually Italian residents’ wealth held abroad.
Through either neglect or difficulties with staying abreast of the constantly evolving requirements of Italian tax law some foreigners resident in Italy realise they have not been compiling the RW correctly.
Despair not, salvation is at hand through active repentance or as the Italians call it “ravvedimento operoso”!
If the RW box was not completed or compiled correctly it is possible to make amends by paying a fine to the Italian Inland Revenue (Agenzia delle Entrate).
Fines vary significantly according to the gravity of the infringement and normally amount to
between 3% and 15% of the declarable value if held in White List countries and between 6% to 30% if held in Black List countries. These fines vary according to the amount of time lapsing between when the declaration was due and when corrective action was taken. For example, for the 2016 tax year, the income tax declaration form compiled in 2017 can be corrected by submitting a supplementary statement (dichiarazione integrativa) before 30 October 2018. Supplementary statements to correct the RW can also be made for previous years.
In the event that the RW needed to be compiled only for monitoring purposes without requiring the payment of IVIE or IVAFE, a fine can be paid amounting to no more than 50€ for each of the last 5 back years missing.
If you are interested in finding out more about how your residential status in Italy relates to your financial planning needs please contact us on the following link: