Budget Law 2024: higher rates for real estate and financial investments held abroad

Among the many new tax features introduced by the latest Budget Law there is also the increase in the IVIE and IVAFE rates. Article 1, Paragraph 91 of Law No. 213/2023 has in fact provided, with effect from the 2024 tax period, for an increase in the rates for both IVIE (Wealth tax on foreign real estate properties) and IVAFE (Wealth tax on foreign financial investments), indeed amending Article 19 of Decree-Law No. 201/2011.

The tightening is significant as far as IVIE is concerned: the applicable rate rises from 0.76% to 1.06%, a differential of almost 40% between the new and old taxation.

By doing so, the legislator has aligned the IVIE rate with the ordinary rate applicable for IMU purposes. However, the tax burden resulting from the two taxes is quite different, considering that IMU is calculated based on cadastral values whereas IVIE refers, depending on the Country in which the properties are located, to much higher taxable bases, ordinarily represented by the purchase cost or market value.

Taking a practical example, on a property located abroad and purchased at a price of € 450,000, an annual IVIE of € 3,420 was due until 2023; from 2024, the annual tax payable will rise to € 4,770.

IVIE is calculated on the basis of months and percentage of ownership and is payable by individuals resident in Italy who own foreign properties. As of January 2020, non-commercial entities (including trusts and foundations) as well as “società semplici” and entities treated as such pursuant to Article 5 TUIR that are resident in Italy are also subject to this Wealth tax.

The right to deduct from the IVIE, up to the amount of the same, any tax with similar characteristics of an asset tax paid in the foreign State where the property is located remains unchanged. Please note that in its Circular No. 28 of July 2, 2012, the Italian Revenue Agency provided a list of property taxes recoverable from IVIE and referred to the main Western Countries.

Regarding IVAFE, as of 2024, the rate increases from 0.2 per cent to 0.4 per cent. This doubling only concerns financial products (thus excluding crypto assets) held abroad in States or territories with a privileged tax regime, as identified by the Ministerial Decree of May 4, 1999, as amended.

It should be noted here that, following the Ministerial Decree of July 20, 2023, Switzerland has been removed from the list of so-called 'blacklist' Countries as of 1 January 2024: therefore, the tax rate increase will not affect financial assets held in these Countries.

The Italian Revenue Agency, commenting on the new legislation in question in its Circular No. 3 of February 16, 2024, confirmed that the Countries to be taken into consideration for the purposes of applying the 0.4% rate are as follows: Alderney; Andorra; Anguilla; Antigua and Barbuda; Netherlands Antilles; Aruba; Bahamas; Bahrain; Barbados; Belize; Bermuda; Brunei; Costa Rica; Dominica; United Arab Emirates; Ecuador; Philippines; Gibraltar; Djibouti; Grenada; Guernsey; Hong Kong; Isle of Man; Cayman Islands; Cook Islands; Marshall Islands; British Virgin Islands; Jersey; Lebanon; Liberia; Liechtenstein; Macao; Malaysia; Maldives; Mauritius; Monserrat; Nauru; Niue; Oman; Panama; French Polynesia; Monaco; Sark; Seychelles; Singapore; Saint Kitts and Nevis; Saint Lucia; Saint Vincent and the Grenadines; Taiwan; Tonga; Turks and Caicos; Tuvalu; Uruguay; Vanuatu; Samoa.

The regulatory change affects the rate of the tax (in connection with the foreign country where the investment is held), but not the amount due as a fixed sum (Euro 34.20 per year), applicable in the case of holding cash accounts and savings deposits abroad.

The taxable base of the Wealth tax remains unchanged, which in the case of financial assets, is the value of the investment at the end of the tax period or of the holding period, if this is less than one calendar year. Depending on the financial product held, the notion of value is to be declined by reference to market value, i.e. nominal value, redemption value or, ultimately, purchase cost.

Like IVIE, IVAFE is quantified based on days and percentage of ownership and is payable by resident individuals: following the Budget Law 2020, non-commercial entities as well as “società semplici” and similar entities, resident in Italy, are also subject to the Wealth tax.

Edited by Silia Muzzi