La dolce vita: Is Italy the new tax haven for the global rich?

Italy has already been attacked by the French Government for using tax incentives to lure wealthy French and other international residents away, but with the war in the Middle East hurting the Gulf states, Italy has become an even more attractive location for the rich.

Tax wasn't the main reason for leaving France, Robert insists over a café crème at Charles de Gaulle airport. It was the beauty of Italy, the bella vita (the beautiful/good life), the art and the music. But for the Frenchman, buying a house in Rome and becoming an Italian tax resident was a very nice part of the package offered by the country, where high net worth individuals can pay a fixed annual tax on all foreign income – regardless of amount – and enjoy a series of other exemptions. 

Robert, who describes himself as only "moderately wealthy", moved to Italy eight years ago after a career in computers which ended with him selling his company. Robert, not his real name, may not be among the French billionaires who have fled the French taxman for Italy, but the advantages to him are clear.

If he'd been buying a house in France, he would have had to pay what the French call frais de notaire (solicitor's fees) most of which goes to the government (much like Stamp Duty in the UK or Real Estate Transfer Taxes in the US). In Italy there's an exemption for the prima casa, the first house you buy. In France, President Macron transformed France's Impot sur la Fortune (wealth tax) into an Impot sur la Fortune Immobilière (real estate wealth tax) so stock market investments, for example, are no longer affected but "if you have ten million dollars' worth of property, this tax is very painful indeed," says Robert. Again, there's nothing like that in Italy. 

In France you also have to pay a property tax (taxe foncière or land tax). "We don't have that here for the prima casa (first home)," says Robert, although he notes "there is a high charge for refuse collection". The best thing as far as he is concerned is that there is no inheritance tax on property you own in Italy up to €1 million ($1.1 million) and it's only 4% beyond that threshold. In France the tax-free limit is much lower – €100,000 ($110,000) – and beyond that it's a sliding scale up to a top rate of 45%.

John Laurenson

But it's for the seriously rich that Italy starts to look like a fiscal paradise.

"I have friends who have moved here for tax reasons and others who are thinking about it," Robert tells me. "For people who really pay a lot of tax, Italy is very attractive because of it's "flat tax".

In Italy, the taxman fixes an upper limit of tax that can be levied on income. However much you earn, you never pay more than that. The upper limit is now €300,000 ($353,000). Although not long ago it was €100,000 before rising to €200,000. If you're paying a million euros of income tax a year in France, Italy is very tempting. As for US citizens, Americans are always taxable on worldwide income, so moving to Italy would not help their tax bill.

Robert tells me that he has two rich French friends who have moved to Italy in the past few months, but they came from the UK. They were both working in finance in the City of London and were keen to move to a place where the fiscal regime was as sympathetic to them as the one Britain had before it changed the rules for wealthy foreign residents. 

"Even at €300,000, Italy's flat tax is still low for anyone making over €1m per year compared to anywhere else in Europe. And it means you get tax certainty and clarity, within the heart of Europe, rather than having to go a long way," says Peter Ferrigno, director of tax services at wealth migration specialists Henley & Partners.

"We have meetings with people every week who would like to leave France," says Paris-based tax lawyer Jerome Barre. "They are unhappy about the tax situation now and they are worried that it will become harsher in the future. People are not confident with the political climate. Taxes are changing a lot, almost every year. People are frightened that after the election of the new president in 2027, things could become harder than today," he says.

Jerome Barre

At this stage though it's more "questions from entrepreneurs and wealthy people who are wondering if they would like to move or not move rather than people actually moving," Jerome Barre explains. "Relocation requires full commitment and careful structuring," he stresses. He adds that for business-owners "they need to change the seat of the company. They are subject in France to an exit tax."

If many wealthy French people are at the "thinking-about-moving" stage, the question is being felt even more acutely in the United Arab Emirates.

But giving up on Dubai's zero-tax regime will be very difficult for many. "When you are in a country where you do not pay any tax, it's very difficult to come back to a country where you have to pay a lot. Especially for those used to spending a lot of money. The net in your pocket is very different, says Barre. And, he adds, people who have grown used to the zero-tax life "are not used to administrative formalities anymore – tax returns, documents – so it's not easy."

More like this:

• Dubai's tourism industry reels from 'brutal' impact of war

• Why more Americans are now moving to Ireland

• Is New York's cannabis business really flying high?

"It's inevitable that many people will reconsider UAE," says Henley & Partners' Peter Ferrigno. "But I think it's far too early for people to wholesale uproot their life when it involves work, family, etc. The vast majority of people in the UAE are still regular people doing regular jobs, even most of the millionaires are millionaires because they are doing well paid jobs rather than being asset owners. If the war is relatively short, they will remain. If it drags on, then people will inevitably look elsewhere, or relocate the family and work remotely until it's safer. If you're in the UAE for work, there aren't likely to be that many equivalent roles in Italy," he says.

However, it is likely that the war in the Middle East will dissuade many rich Europeans who would have otherwise moved there from re-locating to the UAE. Last year, Dubai was the number one destination by far for migrating millionaires, according to Henley & Partners. That number is bound to tumble in 2026, and with its attractive offer for the very wealthy, as well as its reputation for la dolce vita of course, it may well be Italy that benefits.

--

For global insights and expert analysis for the boardroom and beyond, sign up to the World of Business newsletter, while The Essential List delivers a handpicked selection of features and insights. 

For more on business and beyond, follow us on LinkedIn.