[larrylippa]

Dear All: I am an American citizen and I have been living in Rome Italy since 1990. Before I came to Italy, I had worked in the USA from 1974 until 1990. I paid my US taxes regularly and I invested in a house in California in 1988 and some stock and bond funds through American based financial service institutions.
When I arrived in Italy I had a work visa and after one year I opened a business and I registered a VAT number. I had working papers and permission to stay in the country. I had an Italian acct. for my Italian business and an American Acct. for the investments and house that I had in the USA>
I paid Italian taxes on my Italian business income annually and after I incorporated these statements with my US federal and California state returns. And I have been doing that until this year. In 1995, I became a Roman resident and I have been a Roman resident since then. I became an Italian citizen in 2010. I now have dual citizenship.
Here is where the story becomes interesting. This year, for the first time, my Italian acct. asked me if I had real estate and or investments in the US and in the world. I answered yes and he told me that I had to give him the values of the house and the investments. And that I would have to pay a certain percentage of taxes in Italy for these holdings (bought in the US before coming to Italy) which was 12.5% of dividends and capital gains and 27% of interest. And a percentage on any profit of the rents that I received from my house in California. All of this even if I had already paid taxes on these investments in the US when filing my US income tax form. (for the tax year 2009)
And so, I had to pay 1,700 euros to the Italian tax dept. Then I found out that I should have been doing this since I became a resident in Italy, which means since 1995. And being that I hadn't, the Italian tax department now has 10 years, (if they want to and or find out) to audit me. And if they request an audit, I will be liable for the last 5 years from 2004 until 2008. And if they audit me, the sanction will be a minimum of 5% of my ENTIRE holdings.
Which means that a tax that I didn't know I had to pay in Italy, which in reality if I had known and paid would have amounted to 15,000 euros maximum for the 5 years of2004 until 2008 will now cost me 250,000 euros for the penalty and 15,000 for the amount that I was supposed to pay. It sounds bizarre but this is what I have heard and I have asked four Italian accts. About it. All of which had there own idea as to what could be done if the Italian tax dept. comes after me.
So, here are the questions: Do any of you know if this is true?
One of the accts. Told me that if I had filed my italian tax declarations (from when I became a resident in 1995 )with the filed US return , then no tax would have been asked for by the Italian govt. because they would have seen that I had paid in the US and I wouldn't find myself in this situation at this time.
Can you tell me if this is true? Can you tell me if there is any specific tax accord article which states that I don't have to be in this situation.
I await your answer. Thanks larrylippa

[AtlantaTaxExpert]

You MAY want to sent a PM to Five Rings, who has MUCH more expertise on the various tax laws of Europe.

Your post seems to indicate that you followed U.S. tax law, which is the only I can really comment on with any level of expertise.

However, I am aware that many of the European countries do assess taxes on wealth and assets, so the assessments of which you speak sound accurate.