Taxation of Financial 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.
Please see this post on the Exit Tax recently proposed by the Italian authorities. Subject to promulgation of the final law after Parliamentary scrutiny the new rules may operate to impose tax on unrealised gains of certain financial investment where the investor ceases to be tax resident in Italy.
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 non qualifying foreign investment funds and ETF’s | Generally progressive IRPEF and Regional and Municipal 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 |
| 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 investment and tracker fund returns attributable to eligible government securities | Effective 12.5% treatment for the relevant portion |
| 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. |
Special Tax Treatment for Various Categories of Financial Investments
Government Bonds and Investment/Tracker Funds
Italy generally applies a reduced rate of tax on income and gains arising on qualifying government bonds. This 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 distribution of investment yields within an accumulating fund. Tax on the yield will be due when units in the fund are disposed of.
However there is an exception to this general rule. Article 2(1)(c) of Legislative Decree 47/2012 provides that a switch between compartments of the same collective investment undertaking can be regarded as a disinvestment and reinvestment, triggering a charge to tax on any capital gains as if the relevant units had been disposed of. The conversion of units or shares from one compartment to another compartment of the same collective investment undertaking is treated as a redemption, regardless of whether the investor actually receives any proceeds.
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, if 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. The taxpayers needs to report 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 or RL for non harmonised EU funds). 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 (exluding any interest or coupon) on government/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 generally requires use of the LIFO method, Many financial intermediaries and asset managers outside Italy use an average cost or pooling method. Some may produce reports using the FIFO 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-situated 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 are:
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.
The Financial regulatory Background
Non-EU brokerage accounts and the implications of moving to Italy
An issue that frequently arises for individuals moving to Italy is whether they can retain existing investment accounts with financial institutions established outside the European Union, once they are tax resident in Italy.
This can affect accounts held with institutions in the United States, the United Kingdom, Switzerland and other non-EU jurisdictions.
Under EU financial-services legislation, institutions established outside the EU are generally treated as “third-country firms”. Their ability to provide investment services to clients resident in Italy is subject to regulatory restrictions, even where the client opened the account while living outside the EU.
The general rule under MiFID II
The principal EU legislation governing investment services is Directive 2014/65/EU, commonly known as MiFID II.
MiFID II establishes a regulatory framework for investment firms operating within the EU. Firms authorised in one Member State can generally provide investment services throughout the EU under the passporting arrangements.
Financial institutions established outside the EU do not ordinarily benefit from these passporting rights.
Under Articles 39–42 of MiFID II, the provision of investment services by third-country firms is subject to specific conditions. For retail clients, including most private investors, the position depends significantly on the national legislation of the Member State concerned. In Italy, the relevant rules are contained principally in Legislative Decree 58/1998, the “Testo Unico della Finanza” (TUF).
Consequently, a US, UK, Swiss or other non-EU investment firm cannot necessarily continue providing unrestricted brokerage, investment advisory or portfolio management services to a client after that individual becomes resident in Italy.
This does not mean that an Italian resident is prohibited from owning investments or maintaining an account outside the EU. The regulatory restrictions principally concern the financial institution’s authorisation to provide services to clients in Italy.
The position can also differ according to whether the institution is a bank, investment firm, insurer or pension provider, and according to the particular services being provided.
Does an existing account benefit from grandfathering?
There is no general EU grandfathering provision allowing an individual who opened a brokerage account while resident outside the EU to continue receiving unrestricted investment services from that institution after moving to Italy.
However, this does not necessarily mean that the account must be closed. An important distinction exists between the continuation of an existing contractual relationship and the institution’s provision of further regulated investment services after the client becomes Italian resident.
For example, a non-EU institution might permit a client to retain existing investments in custody or sell existing holdings while restricting additional purchases.
Other institutions may require the account to be closed or the investments transferred elsewhere.
These differences can reflect the institution’s regulatory obligations, interpretation of the applicable rules, internal compliance policies and commercial risk appetite.
The fact that an account was opened before the client’s move does not, by itself, provide an exemption from the relevant regulatory requirements.
The reverse-solicitation exception
An important qualification is found in Article 42 of MiFID II, which addresses investment services provided at the client’s “own exclusive initiative”.
Broadly speaking, where a retail client situated in the EU approaches a third-country investment firm entirely on their own initiative to obtain a particular investment service or activity, the relevant third-country authorisation requirement does not apply to the provision of that service or activity, including a relationship specifically connected with it.
This is commonly referred to as the “reverse-solicitation exception”. The exception is deliberately narrow. It does not permit a non-EU institution to solicit EU-resident clients generally. Nor does it allow the institution to market new categories of investment products or services merely because the client previously approached it.
Furthermore, a declaration signed by the client stating that the relationship arose at their own initiative does not, by itself, establish that the exemption applies. The circumstances must demonstrate that the relevant service was genuinely initiated by the client.
For example, consider an individual who opens an execution-only brokerage account while resident in the United States, Switzerland or the United Kingdom and subsequently moves to Italy.
If the individual independently initiates transactions without receiving investment recommendations or marketing communications from the institution, there may be an argument that particular services fall within the reverse-solicitation exception.
However, neither the existence of the pre-existing account nor the fact that transactions are execution-only automatically establishes that the exception applies.
The precise services involved, the circumstances in which they are requested and the applicable Italian regulatory provisions must be considered.
Article 42 concerns investment services within the MiFID II framework. Other regulatory regimes may apply to banking, insurance, pensions and particular financial products.
Is being required to move investments necessarily a bad thing?
From an Italian tax perspective, not necessarily.
Although clients understandably find it frustrating when a longstanding financial institution declines to continue servicing them after they move to Italy, transferring their investments to an appropriately authorised Italian or EU institution can have significant advantages.
As mentioned above the taxation of financial investments in Italy is considerably more complicated than the headline 26% tax rate might suggest.
Consequently, the Italian tax reporting of a portfolio held through a non-EU brokerage account can become surprisingly complicated and expensive.
By contrast, where investments are held through an Italian financial intermediary operating under the “regime amministrato” or “regime gestito” much of the Italian tax calculation, withholding and reporting can be handled directly by the intermediary.
An EU-based brokerage account does not automatically provide these advantages. A foreign EU broker that does not act as an Italian withholding agent may leave the investor with essentially the same Italian reporting obligations as a non-EU broker.
Nevertheless, moving to an institution that understands Italian tax requirements, or preferably one that can operate as an Italian tax intermediary, may substantially simplify compliance and reduce professional fees. At very least interfacing with an intermediary that understands the after-tax on yield on investments could be seen as a definite advantage.
Being required to close or transfer a non-EU brokerage account should not automatically be considered as an adverse development.
The regulatory restrictions may be inconvenient, and there may be costs or tax consequences associated with transferring or disposing of investments. Those need to be examined carefully, particularly where a transfer cannot be completed “in specie”.
Practical Conclusions
Overview
Preparing an annual Italian tax return containing an extensive brokerage 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 purpose. 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 assets denominated in non Euro currencies. It permits identification of the amount and date of receipt of income for conversion into Euro at the applicable FX rates.
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, swaps etc.) identifying where these are to be treated a disposal of the asset or not, and the relevant capital v income treatment 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 (easily) 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 specific rules governing collective investment funds and exchange-traded funds (ETFs) mean that distributions, redemption proceeds and losses usually need to be distinguished from other investment income and capital gains, with different rules governing their taxation and the availability of loss relief.
- 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.
- Thought needs to be given about the financial risks involved in maintaining investments, savings and pensions, in non Euro currencies, whilst living in the Eurozone, and the consequent FX issues.
Alternative Approaches
Holding investments through a suitable Italian or EU institution can offer worthwhile advantages in terms of regulatory certainty, tax administration and potentially the taxation of the investments themselves.
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.
Where investments are held through an Italian regulated Italian financial intermediary operating under the regime amministrato or regime gestito, much of the Italian tax calculation, withholding and reporting can be handled directly by the intermediary.
The important point is to distinguish between “where the account is held”, “which investments it contains”, and “whether the institution can administer the portfolio in accordance with Italian tax rules”.
Those are three separate questions, and each can materially affect the outcome.
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. Tax is due when funds are withdrawn from the policy and income/gains roll up without payment of tax. 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. We are not authorised to or able to offer financial or wealth management advice. We can only advise on the tax impact of the various solutions available.
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.
Legislation and Guidance
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.