Italy Looking to Hike Tax for Wealthy Expats

Italy is dialing back one of Europe’s most generous tax breaks for the ultra-wealthy, a move that could reshape its luxury real estate market.

The country plans to raise a levy on foreign income for new residents who have flocked to Italy to escape higher taxes abroad by 50 percent, Bloomberg reported. The flat annual payment — now €200,000 (or $233,570 in USD) — would rise to as much as €300,000 ($349,254 USD) under a measure in Italy’s 2026 budget.

The scheme lets qualifying newcomers shield overseas income, gifts and inheritances from Italian taxes for 15 years.

Since its debut in 2017, the program has turned Milan and other cities into magnets for global wealth. Former hedge funders, CEOs and Middle Eastern billionaires have relocated to Italy, drawn by its combination of Mediterranean lifestyle and tax shelter.

The U.K.’s decision last year to end its non-domicile regime supercharged that trend, sending high earners south and boosting demand for luxury homes and services.

But the higher fee signals Prime Minister Giorgia Meloni’s government is rethinking the balance between attracting foreign capital and shoring up its own finances. The revenue from the levy hike would help offset tax cuts for middle-income Italians. It also marks the second increase to the flat tax since 2017, a shift advisers say could undermine investor confidence.

“The move isn’t a game changer for the government, as the flat-tax regime affects only a few thousand people, nor for the ultra-wealthy who use it,,” said Francesco Guelfi, a partner at A&O Shearman in Milan, “but it could dent Italy’s credibility” and “risk discouraging new arrivals.”

If the higher levy cools demand, Italy’s luxury sector — especially in Milan, Rome and coastal markets like Liguria — could see slower growth. Nearly 1,500 people utilized Italy’s flat tax regime in 2023, according to data from the Court of Auditors.

Still, the flat-tax regime remains one of Europe’s most attractive for global earners. The country also benefits from a generous inheritance tax setup, according to Reuters.

— Holden Walter-Warner