NEWS » Tax breaks to incentivise the "Super Rich" to invest in Italy
Tax breaks to incentivise the "Super Rich" to invest in Italy
Italy attempts to attract international elite to invest their money in the “Bel paese” in the hope to boost investments and consumption. The super-rich of all nationalities who have lived outside the country for at least nine years can benefit from a new tax regime.
Hundreds of people, including Italians returning home from abroad, are expected to take up the offer of the exemption of foreign income from Italian tax in exchange for the payment of €100,000 a year.
The appeal of the measure is enhanced by the privacy regarding reporting requirements concerning overseas income. The tax breaks can be used for up to 15 years. To participate, candidates will be expected to buy a property and live in Italy for half the year.
The Italian measure is backing the trend if we look at the UK’s “non-dom” regime which gives a special status to residents whose domicile or permanent home is outside Britain. From April, non-doms living in the UK for more than 15 years will lose some of their tax privileges. The remittance basis regime has been criticised as being unfair, particularly for individuals who have been living in the UK on a long-term basis. The individuals who have been living in the UK for 15 years or more are now deemed domiciled so that they pay tax on the same basis as UK domiciles. From 6 April 2017, such individuals will no longer be able to access the remittance basis; UK tax will be charged on their worldwide income and gains on an arising basis.
Property prices in Italy have sharply decreased, therefore buying a property in Italy might be a good investment for wealthy people looking for a new home, after Brexit, or deterred by the tightening of rules in the UK. Sunshine and quality of life might also be a perk for a lot of people relocating in Italy.
Italian political instability could be an obstacle as there's no assurance that a future government will preserve the measure which might be seen as unfair by some citizens.
However, the tax break will not suit all countries. US citizens are taxed on their worldwide income, therefore they would have nothing to gain from it. Also people earning income in Italy would pay a relatively high tax rate (43 per cent before regional and municipal taxes) on their salary, reducing any tax savings on their overseas income.
As a consequence Cyprus, Malta and Ireland may be more attractive alternatives. Since 2009, Portugal has offered incomers a 20 per cent rate of tax for Portuguese income and an exemption for foreign income.
There are also attractive tax breaks for foreigners in Spain and Switzerland where foreigners who are not employed in Switzerland can calculate their tax bills based on their housing costs.