10/03/17

Italy Joins The European Race To Attract Wealthy Foreigners

If you're loaded and looking for somewhere legal to park your dough for an eminently simple fee, I have just the country for you (and no, it's not my adopted, unfairly-maligned-only-as-a-tax-haven Luxembourg), reports Forbes.

La bella Italia wants you (although if you're a U.S. citizen, you're probably not interested since you're taxed on global income). Its government this week introduced a measure in its 2017 budget that it's been discussing for a while: Simply declare Italy your primary residence, pay a flat €100,000 a year "in lieu of the Italian Income Tax," according to the government, and keep the rest of your foreign-earned income.

Potentially more than 1,000 wealthy and potentially super-wealthy people are expected to take up the offer, which officials hopes will draw new investors, spur real estate purchases and boost consumption.

The government makes no bones about its rationale for the provision. "The aim," the Agencia Entrate (Internal Revenue Service) explains on its website, is to "enhance investments in Italy by attracting high-net-worth individuals (by providing) for those individuals transferring their residence to Italy a substitute tax to their foreign income and gain." 

The tax break applies to "newly resident individuals in Italy, who (regardless of their nationality or domicile)" lived outside Italy for nine of the past 10 years, must be renewed annually and has a limit of 15 years.

To qualify, they must live in Italy for a minimum six months of the year, plus they must pay another €25,000 annually for each family member also claiming residence.

The government clearly has its eye on Great Britain and its upcoming exit from the European Union. Some observers speculate that the new tax regime is aimed particularly at super-rich individuals considering a Brexit-induced change of residence.

Italy is not exactly breaking new ground here. Various countries including Portugal, Malta, Cyprus and Ireland have been chasing high net worth individuals with various incentives. In 2014, some 60% of Swiss voters rejected a Socialist Party bid to end a 152-year-old tax break through which an estimated 5,600 wealthy foreigners pay a single lump sum similar to the new Italian regime.

In addition, various European countries offer fast-track residency to entrepreneurs in their ongoing campaigns to continue emerging from the lingering recession. In 2015, Holland began offering start-up visas, enticing foreign entrepreneurs with 12-month temporary residence if they launch and grow innovative businesses - as does Italy itself.