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Italy doubles tax on wealthy foreigners

2024-08-08 14:35:00, Kosova & Bota CNA

Prime Minister Giorgia Meloni hopes the move will address local concerns that immigrants have driven up housing costs.

Italy has doubled the flat tax on foreign income of new residents in the country, in a blow to wealthy expatriates seeking to escape the prospect of higher taxes elsewhere in Europe.

Prime Minister Giorgia Meloni's cabinet approved an increase in the annual tax on foreign income for new residents in Italy to 200,000 euros.

The current €100,000 tax has been controversial among Italians, particularly in the business capital of Milan, where the recent influx of the super-rich has been blamed for a sharp rise in property prices and other increases in the cost of living.

Finance Minister Giancarlo Giorgetti, who referred to the tax as the "so-called flat tax for billionaires", told a news conference that the new tax level would continue to attract wealthy foreigners.

He later clarified that the higher tax would only apply to people who will take up tax residency in Italy from now on, and not those who had already moved there.

Rome also wanted to avoid a competition with other nations in trying to lure foreign individuals and companies through tax relief.

"If this competition starts, countries like Italy - which has very limited fiscal space - are inevitably destined to lose," the finance minister said.

Meloni defended the decision on social media, saying the government "considered it right to double the amount of the tax" on wealthy foreigners because it wanted to "soften a measure that seemed extremely generous".

Italy recorded a budget deficit of 7.4% of gross domestic product last year, more than double the 3% limit set by the EU.

Italy has emerged as a popular destination for the world's super-rich, thanks to generous tax incentives launched in 2016 in a bid to reverse the country's long-running brain drain.

The flat tax scheme, launched after the Brexit vote, saw many British-based Europeans return home, allowing new foreign residents in Italy, or Italians returning after at least nine years abroad, to pay a flat tax on any foreign income or wealth for 15 years.

So far, the scheme has attracted at least 2,730 multimillionaires to live in Italy.

"It will definitely reduce the number of people who want to go to Italy," said Tim Stovold, partner at accountancy firm Moore Kingston Smith, although he estimated that anyone with more than £7m of wealth would consider the new regime. still "interesting" tax.

The tax cuts were opposed by many Italians, particularly in Milan, where the influx of the wealthy has been blamed for a 43% rise in real estate prices over the past five years and about a 20% increase in rents over the past two years.

Many investors had expected the flow of wealthy foreigners to Italy to continue as Britain's new Labor government prepares to scrap the UK's controversial regime which had allowed wealthy foreigners to avoid any tax on it. their overseas income.

Other destinations in Europe and the Middle East remain popular with wealthy expats, including Dubai, which does not impose personal tax on individuals, and Switzerland, which operates a "forfait" system where wealthy individuals agree to the tax. who pay with local authorities.

In Greece, some expats can also benefit from a flat annual tax of €100,000 for up to 15 years.

Individuals must have lived outside Greece for seven of the last eight years and have invested a minimum of €500,000 in Greek real estate, bonds or shares.

The French returned home and international businesses expanded operations following the election of Emmanuel Macron seven years ago, attracted by his business-friendly principles and tax cuts.

But, faced with the prospect of rising taxes and years of political deadlock, after France's snap elections in June, many are now making other plans./Monitor