INVESTMENT ABROAD IVAFE TAX

Tax Monitoring, Foreign Investments, Foreign Current Accounts, IVAFE and Interest Taxation

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1. Introduction

This report has been prepared by F.D.T. Consulting following the analysis of the Income Tax Returns for Individuals relating to the tax years 2024 and 2025, with particular reference to the obligations relating to financial assets held abroad, tax monitoring obligations, the application of IVAFE and the taxation of foreign financial income.

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2. Tax monitoring – RW framework

Taxpayers resident in Italy are required to declare in Form RW:

• foreign current accounts;

• savings books;

• bank deposits;

• securities accounts;

• actions;

• bonds;

• ETFs;

• mutual funds;

• foreign financial policies;

• any financial assets held abroad.

The obligation exists regardless of the production of income.

In the case at hand, several financial relationships held in France are correctly declared.

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3. Distinction between current accounts and investments

A) Foreign current accounts

The following are considered:

• ordinary bank accounts;

• payment accounts;

• savings accounts.

Current accounts generally generate:

• interest income;

• any bank bonuses;

• exchange rate differences.

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B) Foreign investment

Investments include:

• actions;

• bonds;

• ETFs;

• mutual funds;

• SICAV;

• securities accounts;

• asset management.

Investments can produce:

• dividends;

• interest;

• capital gains;

• capital losses.

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4. IVAFE on foreign current accounts

For foreign current accounts, IVAFE is due in a fixed amount.

Amount

For each current account:

€ 34.20 per year

if the average balance exceeds € 5,000.

In the RW Framework, amounts of approximately € 34 are applied for each financial relationship declared.

IVAFE on foreign current accounts works substantially like the stamp duty applied to current accounts held with Italian banks.

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5. IVAFE on foreign investments

If the declared assets are financial investments and not mere current accounts, IVAFE is calculated:

0.20% per annum on the value of the investment.

Example:

Investment value IVAFE

€ 50.000 € 100

€ 100.000 € 200

€ 200.000 € 400

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6. Taxation of foreign interests

Interest accrued on French current accounts or other foreign deposits must be declared in Italy.

The taxation envisaged is:

26%

pursuant to art. 44 of the TUIR.

Example:

Interest received Tax

€ 100 € 26

€ 500 € 130

€ 1.000 € 260 VAT included

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7. Taxation of dividends and investments

The following are subject to the substitute tax of:

26%

Also:

• dividends;

• bond coupons;

• profits from funds;

• capital gains from the sale of securities;

• foreign financial income.

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8. Credit for taxes paid abroad

If the French bank has withheld taxes on interest or dividends:

The taxpayer can benefit from the credit for foreign taxes provided for by art. 165 TUIR.

Example

Interest received:

€ 1.000

French withholding:

€ 128 VAT included

Italian tax:

€ 260 VAT included

Credit due:

€ 128 VAT included

Balance to be paid in Italy:

€ 132 VAT included

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9. Deductible or deductible expenses

Normally deductible expenses

The following can be reduced in financial income:

• commissions directly related to the purchase and sale of financial instruments;

• brokerage fees;

• trading costs;

• recoverable foreign taxes.

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NON-deductible expenses

The following are not normally deductible:

• current account fees;

• account maintenance fees;

• foreign stamp duty;

• administrative costs of the bank;

• credit card fees;

• ordinary bank management fees.

10. Offsetting capital losses

Capital losses realized from the sale of investments may offset:

• future capital gains;

• gains from the sale of financial instruments.

Capital losses can be carried forward to the following four years according to current legislation.

11. Documentary obligations

For tax purposes, the following must be kept:

• annual account statements;

• French bank certifications;

• certificates of accrued interest;

• certifications of withholdings suffered;

• investment statements;

• annual tax statements.

12. Analysis of the taxpayer's position

From the documentation examined, it emerges that:

• foreign financial relations are correctly monitored in Form RW;

• the financial assets are held in France;

• IVAFE is applied to the extent provided for foreign current accounts;

• any interest received must be subject to Italian taxation at the rate of 26%;

• any taxes already paid in France can be recovered as a tax credit, avoiding double taxation.

13. Conclusion

In the light of the documentation examined, it is believed that:

1. The tax monitoring obligations are fulfilled by filling in the RW Framework.

2. Foreign current accounts are subject to IVAFE at a fixed rate of € 34.20 per year for each relationship with an average balance of more than € 5,000.

3. Interest accrued on foreign accounts must be declared and taxed in Italy at a rate of 26%.

4. Foreign financial investments produce income subject to taxation of 26%.

5. Any taxes withheld in France can be recovered by means of a foreign tax credit.

6. Ordinary bank charges and current account fees are not deductible for the purposes of taxation of financial income.