Italy plans exit tax for wealthy expatriates under 2027 budget

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Italy exit tax for wealthy expats

Highlights

Italy's 2027 draft budget proposes a 26 per cent exit tax on paper profits for individuals with at least €800,000 in assets relocating after six years' residency.
The measure may reduce Italy's attractiveness to wealthy expatriates, with legal advisers noting unclear interaction with existing flat-tax and incentive regimes.
Rome projects the exit tax to generate €3.7 million in 2025, increasing to €6.7 million annually before tapering to €3.4 million from 2032 due to potential refunds.

Budget proposal adds uncertainty for mobile wealth

As reported by Financial Times, Prime Minister Giorgia Meloni's coalition has included in its draft budget a plan to tax paper profits accrued by people with assets of at least €800,000 who relocate from Italy from next year.

The proposed 26 per cent levy applies to people who were tax residents in Italy for six of the 10 years before departure. The government says the measure targets the "super-rich", and the tax could be refunded if financial assets are not liquidated for some years after the move.

Wealth advisers and tax lawyers warn the measure risks undermining Italy's appeal to affluent individuals who moved to cities such as Milan under earlier incentive programmes. Charlie Sosna, head of private wealth and tax at Mishcon de Reya, says the plan is a significant move that is making clients who have relocated to Italy, or are based there more broadly, very nervous.

Legal advisers also say key elements remain unclear, including how the tax interacts with Italy's flat-tax regime and other incentive schemes, and whether it covers only Italian assets or worldwide holdings. Maurizio Fresca, a senior tax lawyer at Chiomenti, says the proposal is still at an early legislative stage and could be amended or clarified during parliamentary scrutiny.

Pressure grows on Italy's tax appeal

Over the past decade, Italy has tried to counter brain drain by offering tax incentives to wealthy expatriates and skilled professionals. Under the flat-tax regime introduced in 2017, wealthy new residents can pay a single annual charge on overseas assets and income for 15 years, while other inbound workers have benefited from reduced taxation on part of their salaries for five years.

That framework has already become less generous in recent years. Amid criticism of an influx of super-rich expatriates into Milan, Meloni's government has twice increased the flat tax, which now stands at €300,000 a year for newer arrivals.

Rome expects the exit tax to raise €3.7 million next year, rising to just over €6.7 million for the following four years before falling to €3.4 million annually from 2032 as refunds begin to be claimed. Marco Cerrato of Maisto e Associati says the draft appears to exclude foreign assets held by flat-tax payers, but still needs clarification, while Tim Stovold of Moore Kingston Smith says the measure could prompt some residents to leave before reaching the six-year threshold.

Italy's plan comes as governments in other jurisdictions also reassess how to tax wealthy individuals. Other countries already impose exit taxes, and in the U.S. people with net worth above $2 million who give up green cards or citizenship must pay capital gains tax on unrealised gains on assets worldwide.

Our earlier coverage of France’s budget and market jitters examined how political uncertainty and worries about public finances pushed up French borrowing costs and lifted OAT yields to multi-decade highs. We also noted that restoring investor confidence hinged on passing a budget consistent with deficit-reduction targets, with bond-market stress spilling over into French equities and raising broader euro-zone concerns.

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