ROME (Reuters) – On Wednesday, the Italian government passed a significant amendment to its tax regulations, increasing the flat tax rate to 200,000 euros ($218,220) annually for affluent individuals moving their tax residency to Italy. This adjustment aims to attract high-net-worth individuals and stimulate Italy’s economy, which has been experiencing sluggish growth.
Originally introduced in 2017 by a centre-left administration, the tax incentive is designed to attract wealthy foreigners by offering a more favorable tax regime on income earned abroad. Economy Minister Giancarlo Giorgetti highlighted that the scheme has successfully attracted 1,186 relocations to Italy to date.
The context of this policy shift is notably influenced by the UK’s recent decision to phase out its non-domiciled (‘non-dom’) tax regime by April 2025, a move that spurred a reevaluation of similar schemes globally. Giorgetti emphasized Italy’s stance against the competitive race to offer fiscal incentives to the wealthy, a sentiment echoed in discussions at both G20 and G7 meetings.
“We’re against engaging in a competition with other countries to create tax havens for people or companies. A country such as Italy, with limited fiscal room, can only lose such a competition,” Giorgetti explained to reporters.
The revision is anticipated to make Italy an attractive alternative for many wealthy British residents seeking to shield their offshore income from impending tax increases. Vito Di Pede, a tax advisor from Milan’s Studio Rock tax and law firm, noted an increase in inquiries from UK clients considering relocating to Italy for tax purposes.
The modified tax policy could also bolster Italy’s public finances as Prime Minister Giorgia Meloni readies the 2025 budget, which aims to reduce the nation’s substantial fiscal deficit. Notably, the increased flat tax will only affect new applicants to the scheme, safeguarding those who have already established tax residency under the previous terms.
Portuguese football superstar Cristiano Ronaldo is among the high-profile beneficiaries who capitalized on this tax scheme during his tenure at Juventus from 2018 to 2021.
Despite its benefits, the scheme has faced criticism, including from the European Union. The EU’s Tax Observatory has labeled the high-net-worth individual regimes in Greece and Italy as particularly detrimental, arguing they provide substantial tax breaks to the ultra-rich at the expense of state finances. According to the Observatory’s Global Tax Evasion Report, the policy has been described as “the most harmful” due to the significant exemptions it offers.
