What You Still Report Under Italy's Flat Tax: RW, IVIE and IVAFE
The flat tax removes foreign asset reporting and wealth taxes, but not everywhere: qualifying shareholdings, excluded countries, years outside the option and Italian assets.
For many new residents, the most practical benefit of the flat tax is not the tax saving itself but the paperwork it removes. An ordinary Italian resident must list every foreign bank account, portfolio, property, company stake and policy in the tax return each year, and pay wealth taxes on most of them. A flat tax resident, in principle, lists none of them.
“In principle” is the important part: the exemption has precise limits, and the penalties for foreign asset reporting are among the heaviest in Italian tax law. This article explains what you no longer have to report, what you still do, and the years in which the exemption does not apply at all.
What the Flat Tax Removes
For each year in which the option is valid, holders of the flat tax are exempt from three obligations. First, the foreign assets section of the tax return, known as the RW form, which otherwise requires every foreign financial and non-financial asset to be listed with its value. Second, IVIE, the tax on foreign real estate, normally 1.06% of the value. Third, IVAFE, the tax on foreign financial assets, normally 0.2% a year, or a fixed amount for bank accounts. The same exemptions apply to the family members included in the option.
The Exceptions That Remain
The Revenue Agency set out the limits in circular 17/E of 2017. There are three, and each one catches clients who assume the exemption is total.
Qualifying shareholdings. During the first five years of the regime, gains on qualifying shareholdings are taxed at ordinary rates. For that reason, the companies concerned must still be reported in the RW form, with their value, for those five years. Our article on qualifying shareholdings explains the thresholds.
Countries excluded from the option. The flat tax allows you to leave out the income of one or more countries, for example to claim a foreign tax credit there. For assets in those countries, the ordinary rules apply in full: RW reporting and, where due, IVIE and IVAFE.
Years outside the option. If you become resident in one year and opt from the next, the first year is an ordinary year, with full reporting. The same applies after the regime ends, after fifteen years, a revocation or a forfeiture, for example for late payment of the substitute tax.
Italian Assets Are Never Exempt
The flat tax concerns foreign income and foreign assets. Everything in Italy follows the ordinary rules. A second home in Italy pays IMU; your main home is exempt unless it is a luxury category property. Italian bank and investment accounts pay stamp duty. Italian dividends, rents, salaries and gains are declared and taxed in the ordinary way, and Italian banks withhold tax on them. Many clients therefore keep their investment portfolio with a foreign bank and only day-to-day liquidity in Italy.
No Reporting Does Not Mean No Visibility
Foreign banks still report the accounts of Italian residents to Italy under the international automatic exchange of information. The flat tax does not stop that flow; it simply means the data received should match a taxpayer who is not required to report those assets. Two practical consequences follow. Tell your foreign banks that you are now Italian resident, so their records are consistent. And keep the evidence of your option, the tax return and the payment of the substitute tax, at hand: they are what explains why your foreign accounts do not appear in your Italian return.
Withholding by Italian Intermediaries
If an Italian bank or broker pays you foreign-source income, it may apply Italian withholding tax, because it does not know you have opted. Once the option has been exercised in the tax return, you can give the intermediary a declaration so that it stops withholding on income covered by the flat tax. In the year of the move, any withholding already suffered can be recovered or offset.
A Year-by-Year Checklist
Our View
The reporting exemption is a real benefit, but it is not unconditional. Treat the first year, any excluded country and the first five years of qualifying shareholdings as reporting zones, keep Italian assets fully compliant, and make sure the substitute tax is always paid on time. The same discipline protects the inheritance tax benefits of the regime, explained in our article on gifts and inheritance under the flat tax, and the timing of the first year, discussed in our article on the year of the move.
Frequently Asked Questions
Do I have to report foreign assets under Italy's flat tax?
In general, no: flat tax residents are exempt from the RW form. Exceptions include qualifying shareholdings during the first five years and assets in countries excluded from the option.
Do flat tax residents pay IVIE and IVAFE?
No, for assets covered by the option. They are due for assets in countries excluded from the option and in years outside the option.
Does the exemption apply to family members?
Yes, to the family members included in the option.
Do I pay IMU on my Italian home under the flat tax?
Italian property follows ordinary rules: the main home is exempt unless it is a luxury category property; other properties pay IMU.
Does the flat tax stop foreign banks reporting my accounts to Italy?
No. Automatic exchange of information continues; the option explains why those assets are not in your return.
What happens if I pay the substitute tax late?
Omitted or insufficient payment ends the regime, with ordinary reporting and taxation from then on.
Avv. Marco Mesina
Founder, Move to Dolce Vita · Avvocato, Milan Bar (Ordine degli Avvocati di Milano)
Marco is an Italian tax lawyer who advises individuals and families relocating to Italy on tax regimes, residency, citizenship, real estate and succession planning. Before founding Move to Dolce Vita he worked at Watson Farley & Williams, Withers and Deloitte in Milan.
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