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Italy has doubled the flat tax on foreign income of new residents, in a blow to wealthy expats seeking to escape the prospect of higher taxes elsewhere in Europe.
Prime Minister Giorgia Meloni’s government on Wednesday approved an increase in the annual flat tax on foreign income for new tax residents in Italy to 200,000 euros, from the current 100,000 euros.
The tax incentive, while popular among the wealthy, has been controversial among Italians, especially in the economic capital of Milan, where a recent influx of super-rich has been blamed for a sharp rise in property prices and other increases in the cost of living.
The government hopes the move will also help raise tax revenues and plug a huge budget deficit, easing concerns in Brussels about Italy’s public finances.
The move comes as Rome is struggling to cope with its budget deficit, which last year reached 7.4 percent of gross domestic product, well above the 3 percent of GDP target for EU member states.
The EU has forecast that Italy’s budget deficit for 2024 will be 4.4% of GDP, still well above target, which prompted Brussels to launch the overspending procedure in July, which requires Rome to present a medium-term fiscal adjustment plan by the end of September.
Finance Minister Giancarlo Giorgetti, who on Wednesday called the tax the “so-called flat tax for billionaires,” did not immediately say how much extra revenue the new rate is expected to generate.
In recent years, Italy, usually considered a high-tax jurisdiction, has emerged as a popular new residential destination for the world’s most agile super-rich, thanks to generous tax incentives launched in 2016 in an effort to reverse the country’s long-term brain drain.
Launched aVsceker the Brexit vote prompted many Europeans living in the UK to return home, the scheme allowed new foreign tax residents in Italy, or Italians returning aVsceker living abroad for at least nine years, to pay a flat tax of just €100,000 on any foreign income or assets for 15 years.
So far, the program, known locally as the “footballers’ program,” has been credited with attracting at least 2,730 multimillionaires, including private equity executives, oligarchs and entrepreneurs, to take up residence in Italy, mostly concentrated in Milan.
The tax breaks have been resented by many Italians, especially in Milan, where the influx of wealthy people has been blamed for a 43 percent increase in property prices over the past five years and a nearly 20 percent increase in rents in the two years to March.
However, many investors expected the influx of big spenders to continue as Britain’s new Labour government prepares to abolish the UK’s controversial “non-dom” regime, which had allowed wealthy foreigners to avoid paying any tax on their overseas income.
Shocked outsiders warned that the sudden change in the flat tax and the lack of long-term fiscal stability it implied boded ill for the people.
I’m considering moving there.
A French investor in his forties who is about to relocate
from London to Milan to take advantage of the program, he said
which, although it is not currently reconsidering its plans, “makes
more expensive” and the direction of travel is worrying.
He added: “It sends a signal that this is not a stable regime, which I
I think it’s terrible.” Nodding to the flat tax rate increase,
he said: “You have to ask yourself: €100,000, then €200,000, then €400,000?”
