Italy has long provided attractive tax policies for high earners, affluent individuals, and international retirees. The ongoing “brain drain” continues to pose a challenge.
Affluent Swiss may soon consider not just shopping in Italy, but residing there as well. The nation offers enticing tax regulations for the wealthy.
Could Italy become a tax haven for wealthy Swiss looking to shield themselves and their earnings from the Young Socialists’ inheritance tax proposal? It appears plausible. For football celebrity Cristiano Ronaldo, Italy was undoubtedly a tax refuge. The Portuguese star’s transfer from Real Madrid to Juventus in 2018 was hardly driven by sports motives.
Ronaldo primarily benefited from a particularly favorable tax regulation introduced in 2017: individuals who had lived outside of Italy for nine of the previous ten years and then relocated to Italy were liable to pay a flat fee of just 100,000 euros annually on all foreign-earned income. This rule remains effective for up to 15 years post-move to Italy. Family members even incur a reduced fee of 25,000 euros per year.
According to Minister of Economy and Finance Giancarlo Giorgetti, 1,186 individuals have taken advantage of the “Legge Paperone,” or “Lex Dagobert” in English. Determining the total investment they’ve made in Italy remains challenging, Giorgetti notes.
However, Giorgetti has recently raised the flat-rate tax to 200,000 euros. Nonetheless, this rate remains appealing and could attract affluent Swiss individuals.
Affluent Italians Are Returning
Remarkably, in bureaucratic Italy, newcomers only need to fill out a simple three-page form to avail tax benefits. There is no requirement to disclose assets held outside Italy. It suffices to register your residence in Italy and spend more than half the year there.
In recent years, Italy has increasingly attracted high-earning expatriates. Financial institutions like Unicredit, Mediobanca, Goldman Sachs, JP Morgan Chase, and Citigroup have bolstered their workforce in Milan following Brexit, enlisting many bankers from London. Investment firms such as Certares, Eisler Capital UK, and Andera Partners have also opened offices in the city.
As per the Financial Times, nearly 89,000 individuals have relocated to Italy from abroad following the introduction of various tax incentives for the wealthy. The majority of these movers are Italians who had been working overseas for several years and have since returned home.
The generous conditions may potentially be extended under specific circumstances, such as acquiring residential properties. This has triggered significant increases in real estate prices, with Milan experiencing a whopping 43 percent rise between 2018 and 2023, far exceeding the growth observed elsewhere in Italy.
Discussions with various companies indicate that these regulations have successfully attracted skilled professionals to Italy, aligning with the government’s initial intent. The government aims to bring back well-educated Italians who have emigrated and mitigate the ongoing “brain drain.”
Emigrating for Tax Relief
Interestingly, it was various left-wing administrations that expanded existing rules from the 2010s applicable to researchers, for example. This was enacted in 2019 under the government led by the left-wing populist Five Star Movement and the right-wing nationalist Lega. Despite the recent changes, the tax benefits remain exceedingly generous.
Furthermore, there are additional interesting provisions. Until the end of 2023, foreigners, or Italians returning from abroad after a certain period, only incur taxes on 30 percent of their income for five years. For instance, newcomers with an income of one million euros only have to pay taxes on 300,000 euros. Those relocating to southern Italy were taxed at just 10 percent of their income.
However, this has changed. Individuals moving to Italy from abroad seeking to benefit from tax incentives must have resided outside the country for at least three years, up from two. They are now required to maintain residence in Italy for a minimum of four years before qualifying for the advantageous tax rates, previously set at two years. Additionally, taxes are now levied on 50 percent of income instead of 30 percent; if there are minor children, the rate is 40 percent.
The government is also targeting pensioners. Since 2019, those moving their residence from abroad to smaller municipalities with fewer than 20,000 inhabitants in southern Italian regions such as Sicily, Sardinia, Basilicata, Molise, Apulia, Calabria, or Abruzzo have paid a flat tax of only 7 percent on all income earned abroad. The only condition is that the person must receive a foreign pension and must not have resided in Italy in the preceding five years.
According to the Italian Ministry of Finance, by the end of 2022, over 37,300 taxpayers had availed themselves of various incentives and relocated their tax residence to Italy.
Increasing Number of Returnees
The Osservatorio sui Conti Pubblici Italiani (OCPI), headed by the esteemed economist Carlo Cottarelli, concludes that the expansion of measures in 2019 significantly contributed to the rise in repatriation and immigration of high earners. Critics, however, argue that many affected individuals would likely have returned even in the absence of such tax incentives.
A closer examination, however, reveals a more nuanced story. While the returnees to Italy increased from 4,100 to 13,700 annually between 2011 and 2020, the number of emigrants surged more significantly — from 7,700 to 31,300. This group includes many young academics.
Expectations of attracting researchers and teachers to Italy have not materialized. According to reports, between 2002 and 2016, approximately 11,000 of these professionals left Italy, more than any other nation. Despite the tax incentives, the influx of researchers and educators to Italy has actually decreased from 2017 to 2020. Factors such as precarious job situations, a lack of transparency within the university system, and diminished confidence in career prospects have consistently hindered returnees, as noted by Liaci and Ricciardi.
Italy’s overall situation remains mixed. However, for some affluent Swiss individuals, relocating may indeed present a valuable opportunity — much like it did for Cristiano Ronaldo.
Italy: A Growing Tax Haven for Wealthy Foreigners
Rich Swiss people may soon consider not only going to Italy to shop, but staying there instead. The country offers attractive tax regulations for the wealthy.
Author: Julius Napolitano / Bloomberg
Will Italy become a tax haven for wealthy Swiss who want to protect themselves and their income from the Young Socialists’ inheritance tax initiative? It could be possible. For football superstar Cristiano Ronaldo, Italy was certainly a tax haven. The Portuguese’s move from Real Madrid to Juventus Turin in 2018 was hardly for sporting reasons.
Ronaldo benefited above all from a tax regulation that has been extremely advantageous since 2017: Anyone who had lived outside Italy for nine of the last ten years and then moved to Italy previously only paid a flat rate of €100,000 per year on all income earned abroad. This regulation applies for up to 15 years after moving to the country. Family members even paid a flat rate of just €25,000 per year.
According to the Minister of Economy and Finance Giancarlo Giorgetti, 1,186 people have made use of the “Legge Paperone”, or “Lex Dagobert” in English. It is difficult to determine how much they have invested in Italy, says Giorgetti.
However, Giorgetti has now surprisingly raised the flat-rate tax to €200,000. But this is still attractive and could be of interest to wealthy Swiss people.
Rich Italians Are Coming Back
What is unusual for the extremely bureaucratic Italy is that newcomers only have to fill out a three-page form with boxes to tick in order to benefit from the tax relief. There is no obligation to declare assets outside Italy. It is sufficient to register your residence in Italy and to stay there for more than half the year.
In general, Italy has become a popular place to live for high-earning foreigners in recent years. Banks such as Unicredit, Mediobanca, Goldman Sachs, JP Morgan Chase, and Citigroup have increased their staff in Milan after Brexit, hiring many bankers from London. And investors such as Certares, Eisler Capital UK, and Andera Partners have also opened offices.
According to the Financial Times, almost 89,000 people have moved to Italy from abroad since a series of different tax breaks for the rich came into force. The majority of them are Italians who have worked abroad for several years and have now returned home.
The generous provisions could even be extended under certain conditions, such as when purchasing a residential property. This has led to enormous price increases in the real estate market. Prices in Milan rose by 43% between 2018 and 2023, significantly more than in the rest of Italy.
In discussions with various companies, it is clear that the regulations have helped to attract qualified specialists to Italy. This corresponds to the government’s original idea. The government intends to use this measure to bring back well-educated Italians who have moved abroad and to stop the “brain drain”.
Left for Tax Relief
Interestingly, it was various left-wing governments that expanded existing rules from the 2010s that applied to researchers, for example. This happened in 2019 under the government of the left-wing populist Five Star Movement and the right-wing nationalist Lega. Even after the latest restrictions, the tax breaks are still very generous.
And there are other interesting regulations. Until the end of 2023, foreigners or Italians who return from abroad after a certain period of time only pay taxes on 30% of their income for five years. Instead of an income of €1 million, for example, newcomers only had to pay taxes on €300,000. Those who went to southern Italy paid taxes on only 10% of their income.
That has now changed. Anyone who moves to Italy from abroad and wants to take advantage of the tax benefits must have lived outside the country for at least three years instead of just two. Newcomers must also remain resident in Italy for at least four years instead of two before they can benefit from the advantageous tax rates. In addition, taxes must now be paid on 50% of income instead of 30%. If you have minor children, the rate is 40%.
The government is also courting pensioners. Anyone who moves their residence to a municipality with fewer than 20,000 inhabitants in a southern Italian region such as Sicily, Sardinia, Basilicata, Molise, Apulia, Calabria, or Abruzzo has paid a flat rate of just 7% on all income earned abroad since 2019. The only requirement is that the person must receive a foreign pension and must not have lived in Italy in the previous five years.
According to the Italian Ministry of Finance, by the end of 2022, more than 37,300 taxpayers had taken advantage of the various benefits and moved their tax residence to Italy.
Number of Returnees Increases
The Osservatorio sui Conti Pubblici Italiani (OCPI), led by the renowned economist Carlo Cottarelli, concludes that the expansion of the measures in 2019, in particular, led to increased repatriation and immigration of top earners. Critics, however, believe that many of those affected would probably have returned even without these tax breaks.
A closer look, however, reveals a more differentiated picture. Although the number of those returning to Italy rose from 4,100 to 13,700 per year between 2011 and 2020, the number of emigrants has grown much more sharply—from 7,700 to 31,300. Among them are many young academics.
Hopes of attracting researchers and teachers to Italy have proved to be a failure. According to the report, between 2002 and 2016, around 11,000 of them left Italy, more than from any other country. And despite the tax incentives, the number of researchers and teachers coming to Italy actually decreased between 2017 and 2020. The insecure job situation in Italy, the lack of transparency in the university system, and low confidence in career prospects often prevent people from returning home, according to Liaci and Ricciardi.
Benefits and Practical Tips for Moving to Italy
- Attractive Tax Rates: Leverage the low flat rates available for foreign income.
- Simple Residency Process: Register your residence with a straightforward application.
- Pension Incentives: Explore the reduced rates for pensioners moving to rural areas.
- Networking Opportunities: Connect with expats and affluent communities in major cities like Milan.
Case Studies of Successful Transitions
Cristiano Ronaldo: Not only did this global icon find his sporting success in Italy, but he also took significant tax advantages, highlighting the attractions for high-net-worth individuals.
Foreign Investors: Banks and funds have flocked to Italy, boosting the economic landscape and showcasing the country’s appeal as a lucrative investment destination.