Italian Tax on Foreign-Currency Savings
One of the less obvious tax pitfalls for individuals moving to Italy concerns gains realised on foreign currency. Savings in GBP Sterling, U.S. Dollars or any other currency outside the Euro can fall within the Italian foreign-exchange (FX) tax rules, even where the money was accumulated for everyday living expenses rather than deliberate currency speculation.
The ordinary rules for individuals holding currency outside a business distinguish between the balance test, which determines whether gains from foreign-currency deposits and current accounts fall within the charge, and the calculation of the gain on a relevant disposal. Crossing the balance threshold does not itself create a tax charge on the savings.
Does the Taxpayer Have To Be Speculating?
No. The Tax Agency’s interpretation, set out in Circular 165/E of 24 June 1998, section 2.2.3, treats the investment purpose as an irrebuttable statutory presumption for currency held in deposits or current accounts, or sold forward. For currency from deposits and current accounts, a separate balance and duration condition limits when gains become taxable.
This is the central difficulty for people moving to Italy with ordinary savings. The rules use objective conditions rather than requiring proof that the taxpayer intended to profit from exchange-rate movements. Explaining that the money represents accumulated earnings or retirement savings does not, under the Tax Agency’s interpretation, provide an exception.
When are FX gains taxable?
Under Article 67(1-ter) TUIR, gains from disposals of foreign currency held in deposits and current accounts fall within these rules if the aggregate relevant balance exceeds Euro 51,645.69 for at least seven consecutive working days during the tax year.
The test combines relevant foreign-currency deposits and current accounts across banks and other institutions. Each currency balance is converted into Euro using the exchange rate applicable at the beginning of the tax year. The balances must remain above the threshold throughout the required period: comparing only the first and last day is not sufficient.
If the condition is met at any point during the year, relevant disposals throughout that tax year must be considered. Subsequently reducing the balance does not reverse the result. If the condition is not met, gains from these deposits and current accounts are outside this particular charge, and corresponding losses are not deductible under these rules. The threshold does not apply to forward currency transactions or provide a general exemption for other investments.
A conversion into Euro is a relevant disposal, and the legislation also treats withdrawals as disposals. However, a simultaneous transfer of the same amount in the same currency between accounts held by the same person, without an investment transaction, is not treated in the same way: see Tax Agency Resolution 60/E of 9 December 2024.
Example: ordinary savings cross the threshold
Alex is an Italian tax resident with savings in a foreign-currency bank account and no other foreign-currency deposits or current accounts. We use GBP Sterling for the figures below, but the same principles apply to U.S. Dollars and other currencies outside the Euro.
At the beginning of the year, Alex holds GBP Sterling 30,000. In July, Alex receives a gift of GBP Sterling 100,000 from an aunt, bringing the balance to GBP Sterling 130,000. Assume, solely for illustration, that the beginning-of-year exchange rate is Euro 1.20 for GBP Sterling 1.
For the threshold test, the opening balance is therefore Euro 36,000 and the increased balance is Euro 156,000. Both figures use the same beginning-of-year rate. If the increased balance remains above Euro 51,645.69 for at least seven consecutive working days, the balance condition is met for that tax year, regardless of whether Alex intended to speculate.
Crossing the threshold does not itself create an exchange gain or a tax bill on the account balance. Relevant disposals during the tax year must instead be examined to determine whether a gain arises.
What is the cost of the existing savings?
The beginning-of-year rate is used for the threshold test; it does not automatically reset the tax acquisition cost. Under the ordinary rules, the calculation uses documented historical acquisition costs and the LIFO method: currency acquired most recently is treated as disposed of first. Establishing the cost of savings built up over many years may require reconstructing earlier receipts and disposals. Moving to Italy should not be assumed to provide an automatic revaluation of the balance.
The gift introduces a separate issue: the general rule for donated financial assets carries over the donor’s acquisition cost rather than automatically using the value on receipt. Where the cost of currency withdrawn from deposits or current accounts cannot be documented, Article 68(6) TUIR provides a fallback based on the minimum of the officially determined monthly exchange rates in the year the gain is realised.
A separate assumption is needed to calculate the gain
Suppose Alex later converts the entire GBP Sterling 130,000 balance and receives Euro 165,000. The facts above do not establish the taxable gain, because they do not establish the tax acquisition cost of the original savings or the gift.
If we separately assume that the documented total tax acquisition cost is Euro 156,000, the gain on that conversion would be Euro 9,000: Euro 165,000 less Euro 156,000, ignoring transaction costs. Euro 156,000 is used here as an express additional assumption, not because it was the value used for the threshold test. A different established acquisition cost would produce a different gain or loss.
This example does not address any separate tax consequences of the gift.
Conclusion: Ordinary Savings, Complex Tax Consequences
The practical impact of the rules
These rules can affect savings in GBP Sterling, U.S. Dollars or any other currency outside the Euro. The taxpayer need not have intended to speculate. In Circular 165/E, section 2.2.3, the Tax Agency describes the investment purpose as an irrebuttable statutory presumption. For currency from deposits and current accounts, the balance and duration conditions determine whether the relevant gains fall within the charge.
A person moving to Italy may have accumulated foreign currency over decades simply because it was the currency in which they earned, saved and spent. Under the Tax Agency’s interpretation, that history does not provide an exception. Establishing historical acquisition costs in Euro for an account containing years of receipts and payments can impose a substantial record-keeping burden. The statutory fallback for missing cost records may produce a result that differs from the saver’s actual economic experience.
For those who do not need substantial foreign-currency cash balances, keeping the aggregate value of relevant deposits and current accounts comfortably below Euro 51,645.69 can simplify their position. The test uses the prescribed beginning-of-year exchange rates and is triggered if the threshold is exceeded for at least seven consecutive working days. Splitting money between banks or other financial institutions does not avoid aggregation.
This needs to be considered before the condition is met. For anyone planning a move, the review is best undertaken before the start of the first tax year of Italian residence. Reducing the balance afterwards does not undo the condition for that tax year, and converting or withdrawing currency may itself be a relevant disposal. Those retaining larger balances should preserve acquisition records and review the tax position before making transactions.
Other investments and brokerage cash
The Euro 51,645.69 threshold concerns foreign-currency deposits and current accounts. It does not provide a general exemption for securities, investment or tracker funds, crypto-assets, forward currency transactions or foreign-asset reporting.
For investments denominated in foreign currency, exchange-rate movements should generally be reflected in the investment’s own tax calculation when proceeds and acquisition costs are expressed in Euro. The applicable rules depend on the type of investment and tax regime; funds and crypto-assets should not simply be treated as foreign-currency bank balances.
Foreign-currency cash held through a brokerage account needs separate consideration. Its treatment depends on the legal nature of the cash arrangement and the transactions undertaken. Using currency to purchase an investment, or subsequently converting cash proceeds, may require a separate FX analysis. Transactions linked to currency indices, derivatives and spread betting also need individual review.
The practical message is to plan ahead: ordinary savings can create complex Italian tax consequences even where currency speculation was never intended.