Wealthy taxpayers from the UK and France still want to move to Italy despite Rome’s recent decision to double its flat tax on the foreign income of wealthy expats to €200,000 a year.
With the imminent abolition of Britain’s historic “non-domiciled” tax regime, advisers say Italy remains a Very attractive alternative.
“People are moving not just because of the taxes, but because they might like the Italian Riviera, the Italian Alps, the architecture, the culture, the people,” said Miles Dean, director of international tax at accounting firm Andersen, who said non-domiciles were looking leave the uk “in large quantities”.
Several consultants in the euro zone’s third-largest economy say they are receiving a steady stream of queries from France, where an unstable political climate has fueled concerns about higher taxes on the wealthy.
In August, the right-wing government of Prime Minister Giorgia Meloni unexpectedly… Doubled Italy’s annual tax on foreign income for new tax residents up to €200,000 per year.
The move followed complaints from Italians about the fairness of a flat tax rate set in 2016 as part of a post-Brexit effort to lure the wealthy out of the UK. The scheme is estimated to have attracted 2,730 billionaires, including oligarchs, private equity investors and even sportsmen, most of whom have settled in Milan.
However, Meloni said his government had “considered it right” to update a tax incentive that seemed “extremely generous” as the original flat tax of 100,000 euros had not increased since the start of the scheme.
“The increase from €100,000 to €200,000 does not make a big difference for billionaires who have large incomes abroad,” says Marco Cerrato, a partner at Milan law firm Maisto e Associati. “People we have advised who were planning to move to Italy after 2025 have not changed their plans.”
Maurizio Fresca, an international tax consultant at Italian law firm Chiomenti, said his clients were not so much concerned about the tax increase but about “the politics” behind Rome’s decision, and what that might suggest about the plan’s long-term durability.
“When people with high purchasing power want to move to another country, 100,000 euros a year is not an impediment for them,” says Fresca. “They want to be sure that this regime will continue in force in the future.”
Fresca said Meloni’s government had raised the tax rate to calm growing public discontent over generous incentives for wealthy foreigners.
“The Italian government wants to avoid a political discussion about the fairness of the lump sum,” Fresca said, adding that 100,000 euros was considered “cheap” after several years of high inflation.
Consultants also said Rome had handled the change deftly.
The new rate will only apply to newcomers who establish their tax residence in Italy Since the change was approved, current participants have continued to maintain the previous rate. No other details have been changed, which has served to reinforce the feeling of stability of the system.
Jacopo Zamboni, managing director for private clients at Henley & Partners, which helps wealthy people obtain investment visas and foreign citizenships, said the tax increase was “not perceived as legal uncertainty”.
“Customers see it as an adaptation of the price to current circumstances,” he said.
Zamboni said inquiries about Italy from British and French residents rose 10 percent in August this year compared to August 2023.
The increase in the flat tax is expected to discourage some people who do not have sufficient assets or income abroad from moving to Italy. But Cerrato said that could help avoid a situation where the incentive scheme is scrapped due to “an excessive influx of wealthy foreigners impacting the real estate market.”
Participants pay a flat tax on all their foreign income and assets for up to 15 years, while being protected from tax claims elsewhere by double tax treaties.
Many potential beneficiaries were initially wary, given Italy’s reputation for quick government changes and rapid policy shifts. But the incentives have proven surprisingly durable – they have so far outlasted five governments.
The abolition of non-domicile status in the UK, coupled with the new Labour government’s plans to raise taxes, has led some current UK residents to consider moving elsewhere.
In France, an inconclusive parliamentary election in July sparked an avalanche of calls for wealthy French residents to his advisers who were looking for options to transfer his assets, were a left-wing alliance to take power and reintroduce wealth taxes.
A conservative, Michel Barnier, has since been appointed prime minister, although uncertainty over whether the government will remain in power has increased incentives for people to look for alternatives.
Italy is one of the most popular destinations, which also include the traditional tax havens of Monaco and Switzerland, as well as Dubai, Greece, Cyprus and Malta.
Advisers say taxes aren’t the only factor driving people’s decision-making. “A lot of these issues come down to lifestyle and connectivity,” Dean says. “There’s no one-size-fits-all solution.”
Additional reporting by Sarah White in Paris