Italy trying to attract high net worth individuals with lower taxes

Proposed changes

The Italian Government are seeking to introduce new legislation with the aim of attracting high net worth individuals (“HNWIs”) to Italy.

There are many appealing reasons that inspire foreign people to move to Italy and expats to come back and invest in Italy. The country has given us Michaelangelo, Raphael, and Botticelli. Pizza, gondolas, and scarlet Ferraris. Opera, espresso and luxury fashion brands. Who wouldn’t want to live in Italy, one of Europe’s most sophisticated and seductive countries? Just think of its warmth, style, tasty food, wonderful places, its excitable people and their zest for life, its art treasures and the architectural glories of a magnificent past.

Italy is one of those places that tugs at the heartstrings. And once you have been there and left it for a while, you’ll start dreaming to go back.


New Italian Budget Law: incentives to transfer tax residence to Italy

The Italian Government has released a number of proposals in order to encourage HNWIs to transfer their tax residence to Italy with the option for a yearly fee related to foreign income. This is being referred to as a ‘substitute tax’.

The substitute tax would be equal to Euro 100,000 and would be paid as a lump sum for each year of residence, irrespective of the amount of income earned abroad. Also, the taxpayer is not required to report his/ her foreign financial investments and assets to the Italian tax administration. Eligibility for this potentially favourable tax regime could last for up to 15 years.

Starting from the fiscal year in which the change of residence occurs and providing the payment of the above mentioned charge, individuals opting for the ‘substitute tax’ regime will be subject to Italian taxation on their Italian-source income and gains only, while their foreign income and gains will be completely sheltered from Italian tax. The regime also extends to succession taxes; therefore, inheritance tax will only be payable in Italy on assets located in Italy at the time of the individual’s death.


Possible structuring for non-Italian assets

Under the new proposals, a HNWI paying the substitute tax should not be taxed in Italy on their foreign source income or gains. Therefore, HNWIs may benefit from establishing an offshore structure to hold their foreign assets.

Establishing a trust regulated by foreign law or registering a foundation could represent interesting routes as both structures can be used for succession planning or wealth management, consolidation of assets, charitable and financial purposes.

Whether the aim is to ensure that your assets are sufficiently protected to provide for your family in the future or the intention is to consolidate and simplify their management, these structures potentially provide an excellent means to ensure that assets are retained in a manner which gives you protection and comfort.


How Abacus can help

As a leading fiduciary, funds and professional administration services specialist based in the Isle of Man and Malta with over 40 years of extensive offshore experience, Abacus has developed a reputation for offering market leading specialist solutions, tailored to meet the needs of each and every client.  Our highly qualified and experienced teams offer information and advice on a diverse range of structures, along with providing administration services to families which enable them to manage multiple and complex cross-border assets, to navigate tax and regulatory issues and to plan for both their wealth and their future succession.


The regime is not yet in force and may be subject to changes by the Italian Parliament. No action should be taken on the basis of this article, nor should it be construed as amounting to tax, legal or VAT advice. Professional tax advice should always be obtained before proceeding further.


Written by Marta Bellamoli, Marketing Co-ordinator