Background – Taxation of Gains and Losses
Italian tax-resident individuals generally fall within Italian taxation on their worldwide investment income and gains, including investments held through overseas brokers.
This article considers investments held privately, outside a business: ordinary and preference shares, other equity interests, instruments treated as equivalent to shares, and units or shares in collective investment undertakings, including investment funds and ETFs.
The legal classification of the investment matters. A company share, a fund unit and a debt instrument linked to an equity index can produce different tax consequences despite similar investment exposure. Foreign partnerships, trusts, real-estate funds, pension arrangements and insurance products require separate consideration. An overseas description such as “investment company” or “fund” is not, by itself, sufficient to establish the Italian treatment.
The Italian Government has announced that a reform of system of the taxation of income from financial investments is currently underway.
This blog post applies to gains in equity type investments and certain other investments made by private individuals otherwise than in the course of a business or trading activity. The same rules may well apply to transactions in derivative instruments involving equity type securities and other participating interests. Italian tax rules in this regard generally follow the nature of the underlying instrument or instruments involved, but again, specific advice should be sought.
Rates of tax
For ordinary private-investor disposals of shares and other financial investments, the general Italian substitute-tax rate is 26%. Since 1 January 2019, this generally applies to both substantial and non-substantial shareholdings, subject to specific exceptions. The previous partial-inclusion rules generally no longer apply current disposals regardless of whether the disposal involves a substantial holding or not.
The following table provides the outline framework of the tax regime applicable to financial investments.
| Investment or receipt | General treatment for a private Italian-resident investor |
|---|---|
| Ordinary gains on company shares and comparable equity interests | 26% substitute tax |
| Income and gains (positive disposal returns) from qualifying investment funds and ETFs | Generally substitute tax at a flat rate of 26% |
| Income and gains (positive disposal returns) from qualifying government bonds | Generally substitute tax at a flat rate of 12.5%. Qualifying bonds include bonds issued by the Italian Government, certain Italian state and para state institutions as well as bonds issued by White List governments. |
| Qualifying gains and income on qualifying Italian personal investment plans (PIR’s) | Tax exempt if eligible investment rules and minimum holding periods thresholds are observed. |
| Qualifying fund returns attributable to eligible government securities | Effective 12.5% treatment for the relevant portion |
| Income and gains ( positive disposal returns) from foreign funds outside the qualifying regime | Generally progressive IRPEF and Regional and Muncipal Taxes |
| Gains on disposals relating to entities subject to the privileged-tax-regime rules | Potential inclusion in ordinary taxable income (progessive IRPEF and addtional taxes), subject to statutory exceptions |
| Commodities and Exchange-traded commodities (ETCs) | Gains are generally financial miscellaneous income (redditi diversi), taxable at 26%. |
| Crypto-assets: gains and income from crypto holdings | Generally 33% from 1 January 2026, compared with 26% for 2025, for gains and other proceeds within the specific crypto-assets regime. Qualifying euro-denominated electronic-money tokens remain subject to 26%. Separate rules govern taxable exchanges, losses and reporting. See our article on the Italian taxation of crypto-assets. |
| Commodities and Exchange-traded commodities(ETCs) | Gains are generally financial miscellaneous income (redditi diversi), taxable at 26%. |
Special Tax Treatment for Various Categories of Financial Investments
Government Bond Funds
Italy generally applies a reduced rate of tax on income and gains arising on qualifying government bonds. Theis reduced treatment for eligible government securities can be applied to the relevant portion of a qualifying fund’s return. However in the context of non Italian funds who are not providing specific certification showing the compartmentalisation of assets and income, accessing the reduced rate can be difficult, if not impossible.
Commodity Investments and ETCs
Exchange-traded commodities (ETCs) provide exposure to commodities such as gold, silver or oil. Their tax treatment differs from that of investment funds and ETFs: gains and losses on ETCs generally fall within the “pool” of financial capital gains and losses. Eligible losses can therefore normally be offset against gains on ETC’s and equity instruments, subject to the applicable rules and time limits. Direct ownership of physical commodities requires a separate analysis,
Gains on Investment funds and ETFs
For ordinary non-real-estate collective investment funds, including ETFs, distributions and the positive difference arising on redemption, liquidation or sale are generally classified as investment income (redditi di capitale).
A negative disposal result (a capital loss) instead generally falls within miscellaneous financial income (redditi diversi). This creates an important asymmetry: under ordinary self-assessment and administered arrangements, a fund loss cannot simply be deducted from a fund distribution or positive fund return. Eligible losses may instead offset qualifying financial gains “in the pool” ie. gains arising on disposals of equity holdings, ETC’s etc., subject to the applicable rules. Formal risparmio gestito arrangements require separate analysis.
For example, a €10,000 taxable return on one ETF and a €10,000 loss on another do not necessarily produce a nil Italian tax liability. The positive return will usually remain taxable while the loss is available against eligible gains elsewhere, on equity type instruments, or in a later year.
An accumulating fund does not become tax-exempt because it makes no cash distributions. Its retained investment returns generally affect the value realised when the investor sells or redeems the holding.
Italy has no rules “deeming” a distributution of investment yields within an accumulating fund. tax on the yield will be due when units in the fund are disposed of,
Tax Treatment of non EU-Harmonised Investment Funds and ETF’s
“Non-harmonised” does not automatically mean progressive taxation
The standard treatment extends beyond UCITS funds, often called “EU-harmonised” funds. Certain non-UCITS funds established in qualifying EU/EEA jurisdictions can also qualify where the manager satisfies the relevant regulatory-supervision requirements.
Accordingly, the assessment should examine the fund’s place of establishment, regulatory classification and manager’s status. The exchange on which an ETF trades, its quotation currency, and the location of the investor’s broker do not establish those conditions. (Italian Tax Agency, Circular 21/E of 10 July 2014, section 3).
A US-domiciled fund therefore requires a different assessment from an Irish UCITS fund investing in US shares. The underlying investments may be similar, but the fund’s own legal and regulatory status differs. The same caution applies to UK-domiciled funds following Brexit.
For foreign non-real-estate funds outside the qualifying categories, Article 10-ter(6) of Law 77/1983 generally brings both distributions and positive disposal or redemption returns into ordinary taxable income, while losses of the year remain reportable as miscellaneous and available for offset against pooled assets.
Shareholdings in Privileged Tax Regimes
Separate provisions apply to investments in companies or entities within the privileged-tax-regime rules of Article 47-bis TUIR.
This is not simply a question of checking a country against a familiar “tax-haven list”. The statutory assessment distinguishes controlled from non-controlled entities and considers the relevant effective or nominal taxation, including particular preferential regimes. EU and qualifying EEA jurisdictions are excluded from this definition. TUIR, Article 47-bis.
Where Article 68(4) applies, the gain may be brought fully into ordinary taxable income rather than taxed at 26%. Exceptions include the relevant regulated-market exception for non-qualified holdings and cases meeting the statutory conditions concerning the absence of income localisation in a privileged regime.
The applicable holding-period conditions, supporting evidence and any specific return disclosure must be examined. Carrying on a genuine business abroad should not automatically be treated as satisfying the particular exception needed for ordinary capital-gains treatment.
Withholding Tax at Source
Tax borne by an investment fund or investment company on receipts of dividends and other income received by the fund/corporate managers is not available for credit against the investor’s liability to Italian tax.
The substitute tax regime does not admit credit for foreign withholding taxes at source on dividends and distributions received from foreign companies and investment funds. The tax return forms simply make no provision for a foreign tax credit offset in these circumstances. The Italian Supreme Court has stated that the absence of a foreign tax credit offset may be in breach of Italy’s Treaty obligations. A separate claim for refund of Italian tax might be considered following presentation. In case of denial of the claim, the taxpayer will need to consider the pros and cons of appeal proceeedings.
In any event the foreign tax credit is only available where the foreign tax is definitive and not elegibile for full or partial refund under the rules of the relevant foreign jurisdiction. Any Italian withholding applied on account is not necessarily the final liability, as the effective rate of tax on income may depend on the results of a foreiong annual income tax return.
Cost identification and intermediary reports
A foreign broker’s/asset manager’s capital gains statement )iof one is available at all) should be reconciled with Italian rules before its figures are used in a return.
Some foreign intermediaries do not produce reports at all for gains in tax-exempt wrappers (such as UK ISA’s)
The review should distinguish distributions, fund income, ordinary disposal gains, eligible losses and any receipts subject to special rules. A broker’s combined “realised profit” figure may conceal differences that materially affect Italian tax.
Italian Tax Residents – Reporting Gains and Losses
Gains and Losses are subject to rigorous reporting requirements and processes.
If you invest via an Italian financial intermediary (e.g. bank, broker, or insurance company) the bank will handle the tax reporting and pay any income taxes due withholding the relevant amount of tax before crediting you with the net income. There are a number of alterative regimes which can be offered by Italian regulated financial intermediaries.
If you have not invested via an Italian financial intermediary, then you must report the income and gains personally in annual tax regime, following the same rules for financial institutions which can be summarised as follows
Gains on equity instruments must be “pooled” and shown in Section RT of the annual tax return. You need to show the total sales proceeds, total cost of sales and the net gain. Gains on investment funds and ETF’s do not form part of the pool and must reported in the income tax section (RM). The total pool value of gains and losses on equity instruments will also include gains on other non investment fund/ETF assets, such as ETC’s, gains and losses on corporate bonds.
If losses in the “pool” exceed gains for any particular tax year, they can be carried forward and offset against the total pool gains arising in the four successive tax years. Losses must be claimed in the tax return for the year in which the arise, otherwise they cannot be offset in future years.
Calculating the Gain
The gain is generally the difference between the sale proceeds and the original purchase price increased by purchase taxes, dealing costs on the purchase and other expenses which relate directly to the value of the investment on sale. Dealing costs on sale may not necessarily be deductible.
Where the same shareholding or investment asset has been acquired on several occasions at different prices, calculating a disposal gain requires a method for identifying the acquisition cost attributable to the investments sold.
Valuation Methodologies
Common methods include LIFO (last in, first out), which treats the most recently acquired units as sold first; FIFO (first in, first out), which uses the oldest acquisitions first; and weighted-average cost, which averages the cost of the relevant holdings. These methods can produce materially different gains for a particular year.
The Italian Tax Code requires use of the LIFO method, Many financial intermediaries and asset managers outside Italy use an average cost or pooling method. For this reason, it may be necessary to proceed with a listing of all movements over the years since original purchase, for assets disposed of within a year so as to manually calculate the gain or loss for each one using the LIFO method.
Foreign Exchange (FX) Aspects
Where the asset is denominated in a non Euro currency, the value in Euros at the time of the purchase needs to be calculated and compared to the value of sale proceeds in Euro at the time of sale, using, ideally, Bank of Italy FX rates for the month of the transaction. Similarly purchase tax taxes, dealing costs needs to be converted at the appropriate FX rates at the time they were incurred.
Whether or not you were tax resident at the time of purchase is irrelevant – the base cost is calculated on the basis of the purchase price, converted into Euro, if necessary, at the time of purchase. This means that on a disposal of non Euro assets, the gain will be formed both by the underlying increase in the non Euro value of the investment, but also the FX rate movement over the period of ownership.
FX rates movements can also produce materially different Euro gains and losses for a particular particular transaction, possibly converting a non Euro gain into a Euro loss, and vice versa. The gain or loss on disposal is based not only on the movement in the value of an underlying non-Euro denominated asset, but also on the FX difference over the period of ownership.
The disposal of a financial investment in any year in which your are tax resident in Italy is calculated as the difference between:
- the sale price (converted to Euro, at the prevailing FX rate at the time of the disposal, if the investment is denominated in a non Euro currency); and
- the original purchase price (converted to Euro, at the prevailing FX rate at the time of the purchase, if the investment is denominated in a non Euro currency.
This means
- you are liable to tax on the whole gain even if it accrued in a period in which you were not tax resident in Italy;
- you are potentially liable to tax on any FX gain on an investment denominated in non Euro currency
See this article for more information and examples of how the valuation and FX rules work.
Dealing Fees
Fees for portfolio management services will generally not be deductible in computing liability to Italian taxes on income and gains.
Specific dealing fees on the purchase of an investment to the extent that the can be demonstrated to enhance the value of the assets and are supported by adequate contemporaneous supporting documents may be deductible in computing a taxable gain. Deducting fees on sale may meet with challenge from the tax authorities on the grounds to not add value to an asset which has been disposed of.
Non-Residents
For non-residents, Italian tax generally applies to gains from shareholdings in Italian-sited entities, under the general definition of Italian source income, unless exempt under a DTA or Italian law. Where gains are taxable in general they will be subject to a mandatory 26% flat substitute tax withheld at source where made via an Italian intermediary, or reported via an annual tax return.
Exemption to this general rule may apply for:
capital gains deriving from the disposal for consideration of non- Significant Shareholdings (see definition above) in Italian resident companies traded on regulated markets;
capital gains deriving from the sale for valuable consideration or redemption of securities not representing commodities and mass certificates (securities such as bonds and other debt instruments offered to the public at large) traded on regulated markets, as well as from the sale or withdrawal of foreign currencies deriving from deposit and current accounts;
- disposals made by residents of another country that can claim the benefit of a Double Tax Treaty (DTA), such as the US-Italy DTA (Article 13), may allocate taxing rights to the state of tax residence state, potentially reducing or eliminating Italian tax liability.
The PIR – Individual Savings Plan
Piani Individuali di Risparmio (PIR) are Italy’s tax-advantaged individual savings plans, introduced by Article 1, commas 100–114, Law n. 232/2016 (Legge di Bilancio 2017) to encourage investment in Italian and EU companies, particularly SMEs. Key features:
Standard PIR’s
- Eligibility: Open to Italian tax residents; one PIR per person, managed through Italian regulated banks or authorized financial intermediaries.
- Investment Rules: At least 70% of the portfolio must be invested in Italian or EU companies (with Italian operations), and 25% of that in SMEs not listed on major indices (e.g., FTSE MIB). Annual contribution limit: €40,000; total limit: €200,000.
- Tax Benefits: Capital gains and dividends are exempt from the 26% substitute tax (or IRPEF for relevant shareholdings) if held for at least 5 years. Early withdrawal (before 5 years) voids the exemption, taxing gains retroactively.
Alternative PIRs (PIR Alternativi)
Alternative PIR’s (introduced by Legge di Bilancio 2021, Law n. 178/2020) are specialized Individual Savings Plans targeting investments in alternative assets like venture capital, private equity, and startups, particularly SMEs and innovative firms. They offer the same tax exemptions as standard PIRs (no 26% capital gains tax after 5 years) but require at least 70% allocation to illiquid investments (e.g., startup funds or unlisted companies). Minimum holding period is 5 years, with annual limits of €150,000 and total €750,000. These plans encourage long-term funding for Italy’s startup ecosystem, but compliance with investment criteria is strict, and early withdrawal forfeits benefits.
Practical Conclusions
Overview
Preparing an annual Italian tax return containing an extensive portfolio of non Italian assets, managed by intermediaries outside Italy, denominated in non Euro currencies, can be a seriously time consuming affair.
Statements and certification of income made by foreign intermediaries are often simply not fit for purposes. the intermediaries report income and gains in the context of their domestic rules. Income and gains are not classified according to Italian tax rules and needs to be done manually.
The Starting Point
The starting point is usually a summary, ideally in spreadsheet format, of all movements, investment by investment, on the account since inception. This allows the relevant cost for each sale to by determined, along with the date of purchase used to calculate the applicable Euro FX rate for purchases in non Euro currencies.
Assets in the portfolio can be listed and categorised for Italian tax purposes (income tax, gains and wealth tax).
The listing of movements should also include all “corporate” actions (e.g stock splits/de-mergers, scrip issues, bonus issues, identifying where these are to be treated a disposal of the asset or not, and the relvant capital v income treament of amounts accruing.
The movements can also identify “contamination” of foreign tax rules (e.g specific UK rules for identifying Excess Reportable Income on collective investments funds) determining if these are relevant for Italian tax purposes.
The listing also can be used to identify the correct treatment of equalisation payments subsequent to purchase adjusting the base cost of any purchase.
Maintaining a Foreign Portfolio of Investments after Transfer to Italy.
In summary the issues arising as a consequence of transferring tax residence to Italy while holding a foreign investment portfolio are are:
- Italy’s withholding tax rules may not permit credit for foreign taxes, resulting in double taxation.
- Italy’s streaming rules for income and gains are complex and can mean that gains on investment and tracker funds cannot be offset by losses on the same type of investment.
- The computation of capital gains in Euro can be complex.
- Investments in a non Euro currency – ie. where the investment is a currency itself rather than say an equity, commodity or fund, can, in certain circumstances, give rise to taxable gains and losses deriving from the exchange rate movement in the period of ownership.
- Calculating wealth tax on a portfolio can be simplified by reporting the total value of the portfolio, but this meaning losing the tax saving deriving from the rules that pro rata the tax depend on the days an investment is held within a tax year.
- Italy has a possibly prejudicial tax treatment for certain non EU and “priviliged tax regime ” investments which means that income and gains can be taxed at marginal rates, rather than the flat rates of substitute tax generally applicable to income and gains.
- The need to produce a full movements listing to identify and categorise each investments in the portfolio and to identify the correct italian tax treatment. The Movements Listing needs to be updated each tax year.
Alternative Approaches
In the light of the complexity of categorising foreign source income and gains to identify the Italian tax treatment of particular types of investment income and gains, it is always worth considering a transfer of investments to an Italian financial intermediary. By doing so you can elect for the Italian intermediary to handle all of all Italian tax reporting, such that the income, gains and ownership of the assets does not need to be reported in an Italian tax return.
Consideration should also be given to transferring assets to “wrapper” such as a life insurance backed invest policy. Income and Gains will accrue within the wrapper without needing to be reported. If you use an Italian regulated insurance company, they will handle all of the tax reporting.
However, the tax consequences (including the potential realisation of taxable gains) of any restructuring of investments needs to be carefully considered.
Advice on specific financial investments and investment (wealth management strategy must be given by an authorised, regulated financial intermediary. Financial advice should be given by an authorised intermediary who is based in the same country as their client.
In short, ahead of a move to Italy, serious thought needs to be given to transferring investments to an Italian bank or to an Italian financial institution, in order to ease the significant burden of reporting foreign assets.
At any rate serious thought also needs to be given about the financial risks involved in maintaining investments, savings and pensions in non Euro currencies, whilst living in the Eurozone.
Legislation and Guidance
See this article for more details on the Italian tax compliance, reporting and payments involved with a portfolio of assets managed outside Italy.
Legislation:
- TUIR Articles 23, 67 (DPR 917/1986); DLgs 461/1997;
- Legge di Bilancio 2023 (Law n. 197/2022).
Guidance:
- Agenzia delle Entrate
- Circular n. 23/E/2010;
- Circolare del 27/06/2014 n. 19 – Agenzia delle Entrate – Direzione Centrale Normativa
- Interpello Risposta n. 175/2025.
Italian Tax Residents
For Italian tax residents, capital gains from the disposal of shareholdings are taxed as miscellaneous income (Article 67, TUIR). Italian tax residents are liable to tax on gains on disposal of equity interests companies and other entities wherever in the world the entity is located, subject possibly to special rules under a DTA of disposals involving defined shareholdings in an entity located in the territory one of Italy’s treaty partners.
The tax rate depends on the type of shareholding:
Non-Significant Shareholdings (see definition above): Gains on equity instruments are taxed at a 26% flat substitute tax (Article 5, DLgs 461/1997). The tax is withheld by the Italian financial intermediary (e.g. bank, broker or intermediary) entrusted with the management investments, otherwise reported via an annual Italian tax return.
Significant Shareholdings: 49.72% of the gain is added to taxable income and taxed at progressive IRPEF rates (23–43%, plus regional/municipal taxes). The “participation exemption”, is a reflection of the Constitutional principle that income or gains should be taxed twice, and of the fact that the entity being disposed of has paid tax on corporate profits. It is obviously a rough and ready method of arriving at an overall rate of tax paid on disposal of a significant shareholding in an Italian company, targeted at simplicity and easing tax reporting.
Investment Funds and ETFs: Gains on these assets are separated from gains on other investments. Under Italian tax rules the relevant gains are fully taxable as income – either withheld at source by an Italian intermediary, or to be reported in Section RM of the annual tax return in each case liable to the 26% substitute tax rate if the gain derives from the disposal of investment funds/ETF’s which are complaint with EU regulations, otherwise they are reported in section RL of the return and are liable to tax at scale rates. Losses on these assets cannot be offset against gains on the same type of asset, but flow into the general pool of gains and losses applicable to equity and other instruments.
- Exemptions: Gains from equities held in PIR’s – Individual Savings Plans offered by Italian regulated intermediaries may be exempt under specific conditions. Losses may offset gains within the same tax period.
Definitions
A Substantial Shareholding (“particpazione qualificata“) is an equity interest corresponding corresponding to:
- at least 5% of the total share capital; or
- at least 2% of total shares carrying a right to vote
for shares and securities traded or listed on a regulated financial market.
- at least 25% of the total share capital; or
- at least 20% of total shares carrying a right to vote
for shares not traded or listed on a regulated financial market.
For these purposes all sales in any twelve month period should be counted checking if the disposal concerns a shareholding that is substantial at any time time during during that period.
For more details see this article.