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Do I need to declare my foreign bank accounts to the Italian taxman?

Giampietro Vianello
Giampietro Vianello - [email protected]
Do I need to declare my foreign bank accounts to the Italian taxman?
Euro banknotes and a paper envelope on a wooden table. Photo by Markus Spike on Unsplash

As an Italian tax resident, you’ll need to file and pay taxes on both domestic and foreign income – but are you required to declare bank accounts held abroad?

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Under Italian law, anyone who’s considered a resident for tax purposes (or fiscal resident) is required to file and pay taxes in Italy.

But while there’s no requirement for taxpayers to declare their Italian bank accounts (financial authorities can freely monitor these by accessing the national bank accounts registry), do you need to disclose any bank accounts you hold outside of Italy?

Under article 4 of Law 167 June 1990, which regulates the monitoring of taxpayers’ foreign assets, Italian tax residents are required to declare bank accounts, including joint accounts, held abroad by completing the foreign earnings and finances section of their yearly tax return form. 

READ ALSO: When are the deadlines for filing your Italian income tax return?

As of this year, this corresponds to quadro W (section W) of form 730 and quadro RW (section RW) of form Redditi PF, with both sections requiring taxpayers to provide details including the account’s overall details, country and balance at the start and end of the relevant tax year expressed in euros. 

That said, there are two main exceptions.

The requirement doesn’t apply to bank accounts whose balance never exceeded 15,000 euros at any point during the relevant tax year, and whose average balance for the year was below 5,000 euros. 

If neither or just one of these conditions is met, the bank account will have to be declared to Italy’s tax office. 

People are pictured as they speak with tax professionals at a Rome branch of the Italian tax office

People are pictured as they speak with tax professionals at a Rome branch of the Italian tax office in November 2012. Photo by ANDREAS SOLARO / AFP

It’s also worth noting that any foreign account with an average yearly balance of over 5,000 euros is subject to Italy’s tax on financial activities held abroad (IVAFE), which is a flat charge of 34.20 euros per account. 

If you hold one or more foreign accounts passing this threshold, you’ll have to make a note of the IVAFE you owe in your tax return form.

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Besides the above-mentioned account balance thresholds, there is a further exception to the declaration requirement: people who have opted for Italy's special seven-percent tax rate are exempt from having to disclose (and pay foreign wealth taxes IVIE and IVAFE on) assets held abroad, including bank accounts, as part of the scheme's advantages. 

What happens if you don't declare a foreign bank account?

Failure to declare a foreign bank account when required to do so can result in hefty penalties.

Late filing carries a fixed-rate fine of 250 euros and applies to any declaration submitted within 90 days from the deadline.

READ ALSO: What happens if you miss your Italian tax return deadline?

Fines for failure to file range from three to 15 percent of the undeclared amount if the account is based in a 'White-List' country, and from six to 30 percent if the account is based in a 'Black List' nation. 

Italy’s White List is made up of countries that share financial information with the Italian government and are generally regarded as having transparent fiscal regimes, whereas the Black List includes countries that may not share financial information with the government and/or offer privileged tax regimes. 

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Does PayPal count as a foreign bank account?

Though Italy’s tax office doesn’t explicitly make mention of PayPal as a foreign account which is subject to the declaration requirement explained above, some financial experts claim that it should be considered as such, also citing that PayPal itself claims to be “duly licensed in Luxembourg as a bank (or 'credit institution' in legal terms)” and to be “supervised by the Luxembourg financial regulatory authority” on its website

That said, there is no consensus among financial experts in the country as to whether or not the platform should be considered a foreign bank account for tax declaration purposes.

PayPal account owners in Italy are advised to contact the national tax office or a qualified financial advisor for legal advice.

Please note that The Local is unable to advise on individual cases. Find more information on the Italian tax agency’s website or seek independent advice from a qualified tax professional.

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Comments (1)

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Elaine 2024/05/22 21:35
I believe there is a second exception. Those of us who are tax resident in Italy but have elected the 7% flat tax regime do not report our foreign accounts and pay no wealth tax or IVAFE. Until the 7% tax years are over of course. Granted, you recently reported there are only 454 of us…but it is still a valid exception 😜.

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