Italy aims to increase flat tax on wealthy foreigners by 50%

2025-10-20 22:27:00, Kosova & Bota CNA

The increase to 300,000 euros would be a major blow to the wealthy seeking to avoid high taxes in other parts of Europe.

Italy intends to increase the flat tax on foreign income of wealthy individuals who settle in the country by 50%, bringing it to 300 thousand euros.

The increase, if approved by parliament, would deal a severe blow to the wealthy seeking to escape high taxes in other European countries.

Over the last decade, Italy, and especially its financial capital, Milan, has become an attractive destination for the world's super-rich, lured by the quality of life and fiscal incentives that allow them to pay a fixed amount on all their income abroad.

But the scheme has been controversial among ordinary Italian citizens, especially in Milan, who have blamed it for rising real estate prices and worsening the housing crisis.

A Finance Ministry official said on Friday that the measure has been included in Italy's draft budget for 2026, which foresees around 18.7 billion euros in tax cuts and increased social spending, including a tax cut for low- and middle-income workers.

The draft budget also confirms Rome's aim to collect over 4 billion euros from banks next year, after members of Prime Minister Giorgia Meloni's three-party coalition reached a last-minute compromise on how to secure the revenue without imposing a windfall tax.

"It is a budget law that responds to the concrete needs and problems of families, businesses and workers of this country," Meloni said at a press conference in Rome.

With the next general election scheduled for 2027, Meloni is eager to ease the financial pressure on Italian families, whose purchasing power has been eroded by strong inflationary pressures in the years following the Covid-19 pandemic.

However, with GDP growth expected to be below 1% for the next three years, Rome is looking for new sources of revenue to keep the budget deficit below the EU's 3% threshold.

If approved by Parliament in the coming weeks, the new flat tax of 300,000 euros will be applied to the income earned abroad of people moving to Italy, once the new budget comes into force in January 2026.

This will be the second increase in the scheme, which was launched in 2016 to combat the “brain drain.” Since then, it has attracted many wealthy people who have settled in Milan, especially after the UK tightened its tax regime.

Meloni's government last year doubled the flat tax on new arrivals to 200,000 euros. Finance Minister Giancarlo Giorgetti described the scheme at the time as a "so-called flat tax for billionaires" and insisted that Italy remains an attractive destination for the super-rich, even after the growth.

Under current rules, a new foreign resident, or an Italian returning after at least nine years of residence abroad, can pay a flat tax of 200,000 euros per year on any foreign income or assets for a period of up to 15 years.

Other countries that have been of increased interest to the wealthy include the United Arab Emirates, which imposes no personal tax on individuals.

Monaco and Switzerland continue to be favorite destinations for the super-rich. While Switzerland is one of only three European countries to implement a tax on net wealth, wealthy foreigners can reach personalized agreements with cantonal authorities on the total amount of taxes they pay on their income and wealth./ Monitor