On Wednesday, Italy's government passed a new measure that increases the 'flat tax' for wealthy individuals earning income abroad and relocating their tax residence to Italy to 200,000 euros ($218,220) annually. This tax incentive, initially introduced by a center-left government in 2017 to attract high-spending individuals and stimulate Italy's slow economy, has seen 1,186 relocations so far, according to Economy Minister Giancarlo Giorgetti. The scheme has come under increased scrutiny following Britain's decision to terminate its long-standing 'non dom' residency regime. Giorgetti emphasized Italy's stance against countries competing to offer 'fiscal favours' to the wealthy, reiterating this position at G20 and G7 meetings.
Tax advisors anticipate that Italy will become a new haven for wealthy British 'non dom' residents seeking to avoid higher taxes on their offshore income. Vito Di Pede, a tax advisor at Milan's Studio Rock tax and law firm, noted that several clients are considering relocation to Italy for tax purposes. This move could slightly bolster Rome's public finances as Prime Minister Giorgia Meloni works on a 2025 budget aimed at reducing the country's significant fiscal deficit. The increased flat tax will only apply to new participants, exempting those who have already relocated. Notable beneficiaries include Portuguese soccer star Cristiano Ronaldo, who became an Italian tax resident during his tenure at Juventus from 2018-2021. Italy's audit court estimates that taxes collected under this scheme from 2018 to 2022 totaled 254 million euros, despite criticism from the EU regarding its fairness and impact on state finances.
