In recent years, Italy has emerged as a prime destination for wealthy individuals. This trend has seen a significant increase over the past decade, with Italy becoming one of the top 10 choices for high-net-worth individuals (HNWIs) looking to relocate.

​Key Drivers of Millionaires Inflows in Italy

According to British investment migration consultancy Henley & Partners, Italy is expected to be the top 2024 European destination for globally relocating millionaires, with an expected 2,200 HNWIs (High Net Worth Individuals, with at least $1mn in liquid investable wealth) moving to the country this year (Figure 1).

Figure 1: Henley & Partners estimates

​Italy’s excellent reputation and quality of life, its immense economic potential, its welcoming investment migration program and tax regime have made the country one of the most popular destinations for HNWIs relocating. Highly targeted areas include Milan, Rome, Florence, Tuscany, Liguria and Lake Como. Milan is especially preferable among private equity professionals.

The Italian economy has performed better than many of its peers over the past years. In 2023, GDP volume was 4.2% larger than pre-pandemic, whereas the total Eurozone economy was 3.5% larger and the German economy just 0.1%. Despite past challenges, primarily external factors and pro-cyclical fiscal policies that adversely affected domestic demand, Italy remains at the forefront in several key sectors, such as Greentech, Aerospace, and more recently semiconductors.

Although HNWIs have for long established strong economic ties with Italy, owning multinational firms that import goods or investing in Italian businesses, historically relocation to Italy was lagging. However, since 2017, thanks to Italy's Residence by Investment Program (also known as the Italy Golden Visa), those who invest directly or via their company in Italy can now be granted a residence permit based on their economic contribution to the country, significantly reducing the bureaucratic barrier that was perceived to be a hurdle. The Investment Program, which ranks 4th on the Global Residence Program Index (according to Henley & Partners), has investment options that range from €250k in innovative start-ups, to €2mn in Italian government bonds.

Overview of HNWIs Tax Benefits in Italy

Regardless of their nationality, new tax residents can relocate to Italy and benefit from various tax regimes.

• The regime that is proving to be the standard for HNWIs is a flat tax of €100k (recently increased to €200k) for eligible residents who are fiscally domiciled in Italy and generate their income from abroad. The flat tax regime has benefited footballers such as Cristiano Ronaldo and many finance professionals who left London for Milan after Brexit;
• Under the expatriate workers scheme, new tax residents in Italy can benefit from a 50% reduction in their taxable income for a period of five years;
• The Italian inheritance tax rate is between 4% and 8% applied above various thresholds, but the flat tax regime exempts foreign assets from inheritance tax;
• Capital gains are in general taxable at a flat 26% tax;
• Estate duty in Italy is a relatively modest 4%.

From 2017 to 2023, Italy's flat tax regime for new residents has attracted thousands of HNWIs, with the number of applicants steadily rising each year. Italy's tax incentives had attracted 2,730 individuals by the end of 2022 (Table 1).

Table 1: number of individuals under the flat tax regime (source: Ministry of Economy)

​Despite Prime Minister Giorgia Meloni’s decision in August 2024 to double the flat tax to €200,000 a year, wealthy UK and French taxpayers still want to relocate to Italy, fleeing the prospect of higher taxes. At Henley & Partners, inquiries about Italy from British and French residents were up 10% in August this year compared with August 2023. Additionally, investors may have shed their initial skepticism over Italy’s flat tax now it has remained in place for seven years.

Figure 2: ​Henley & Partners estimates

Approximately 9,500 HNWIs are projected to leave the UK in 2024 (Figure 2), a new record outflow for the UK (more than double the number who left last year), with London expected to be especially hard hit. This represents a continued trend since Brexit, but it will be heightened by the removal of the non-dom tax regime, announced in the first quarter of 2024 and effective from 6 April 2025. The 225-year-old non-dom tax regime allowed 74,000 wealthy foreigners in the 2022-23 financial year to avoid paying tax on overseas income. Additionally, the Labour government has pledged to remove non-doms’ ability to permanently shield foreign assets held in a trust from inheritance tax, currently at 40%. Labour has also struck fear into the UK’s private equity industry by pledging to close the “loophole” on the taxation of carried interest, currently taxed as a capital gain at 28% rather than as income (taxed at up to 45%). The prospect of this fiscal tightening has led many HNWIs in the UK to look at alternatives such as Italy.

​In France, the inconclusive parliamentary election in July 2024 prompted wealthy French residents to seek options to shift their assets abroad, were a leftwing alliance to take power and reintroduce wealth taxes. Italy is one of several popular destinations.

Italy is also attracting new ultra-wealthy residents from Switzerland, where a proposal has been put forward to impose a 50% inheritance tax on assets worth more than CHF 50mn to fund the country's green transition.

The Flat Tax Scheme

Italy’s flat tax scheme was introduced in 2017 as part of a broader strategy to attract HNWIs into the country to establish tax residency in the country. According to the Law 232/2016, also known as the 2017 Budget Law, the program offered wealthy foreigners and former Italian residents the chance to pay a fixed annual tax on foreign-sourced income, regardless of its actual amount. Initially set at €100,000 per year, this flat-rate taxation provided an attractive incentive for individuals seeking a simplified and predictable tax liability. But due to increasing criticism from other countries as well as people living in Italy, the Italian government has decided in August 2024 to double the rate to €200,000 for new applicants, reflecting a shift in fiscal policy aimed at addressing criticism while maintaining the scheme's allure.

There are multifaceted benefits of the flat tax regime, which cannot be underestimated. One of its primary appeals lies in its simplicity, as it eliminates the need for progressive taxation on global income and provides certainty for long-term financial planning. Participants in the scheme also enjoy exemptions from several tax obligations, such as reporting foreign financial assets. Additionally, the flat tax exempts participants from inheritance and gift taxes on assets located abroad, as well as taxes on the value of overseas properties (IVIE) and financial assets (IVAFE). These provisions are particularly attractive to those with substantial international investments, allowing them to structure their wealth more efficiently.

The scheme further extends to immediate family members, enabling them to join the program at a reduced annual rate of €25,000 per individual. This inclusivity adds to its appeal for families relocating together. Additionally, by providing eligibility of this law for up to 15 consecutive years, this program provides long-term stability for financial planning. This security provides assurance to participants, encouraging them to integrate into Italian society and invest in the local economy without fear of sudden regulatory changes.

Growing Concerns about the Flat Tax Scheme

Despite the mentioned advantages, the flat tax scheme has faced considerable criticism and sparked public debate. Critics of the flat tax scheme argue that it disproportionately benefits the ultra-wealthy, intensifying economic inequality and harming the middle- and lower-income classes. The European Union has also raised concerns about such regimes across member states, criticizing them as harmful to the tax bases of other countries. Critics claim that offering substantial tax breaks on foreign income undermines the principles of fair taxation and contributes to fiscal imbalances.

The scheme’s impact on local markets has further fuelled controversy. The inflow of new residents in major cities all across Italy, especially Milan and Rome, has intensified demand for housing, creating further affordability challenges for local residents. In times of economic difficulties, especially for the lower and middle class of Italy, such measures intensify discussions around the flat tax regime primarily serving the interests of the wealthy at the expense of broader social equity.

As a clear response to these criticisms, the Italian government decided to double the flat tax rate to €200,000 for new entrants in 2024 aiming to address the above-mentioned concerns. This move represents a compromise between preserving the scheme's attractiveness to HNWIs as well as ensuring it contributes more significantly to public revenue, while more importantly, protecting the Italian citizens. Even if the revised rate may only lead to a small decline in potential applicants, it underscores Italy's commitment to balancing its appeal as a destination for global elites with the need for fiscal responsibility.

Recent Changes in Milan's Economy

Over the past years, Milan has become a more attractive hub for the most important financial institutions and corporate law companies. This renewed focus on Milan is attributable to Italy’s deal making landscape, which offers favourable conditions for international and domestic banks, family offices, private equity funds institutional investors and legal advisors.

Following the Brexit, large investment banks such as Goldman Sachs and J.P. Morgan increased their presence in Milan in order to maintain strong ties with the European markets, leveraging Milan strategic position and regulatory stability. For example, J.P. Morgan expanded its local headcount by 30% since 2020, establishing its Southern Europe headquarters in Milan, while Goldman Sachs relocated a considerable part of its Euro trading desks. This shift has reflected investment banks efforts to diversify their presence across key European hubs, with Milan emerging as a focal point for banking, investments and advisory services in the post-Brexit landscape.

Recently, Milan is also becoming a main destination for private capital business, with firms such as Eiffel Investment Group, Sienna Private Equity and DIF Capital Partners recently establishing offices. Mega-funds such as Blackstone, KKR, and Ardian are expanding their office presence year by year while hedge funds such as Point 72 Asset Management and Capstone Investment Advisors also opening offices in Italy. Italian tax regulations, offering flat-rate taxation for foreign residents, is the main attraction for investment professionals, especially for seniors earning significant carried interest, thus further contributing to the interest in Milan as a strategic office.

These decisions made by private capital investors come as no surprise, given the increased activity in Italian private markets. The country is on track for a record of EUR 47 billion in deal value this year, nearly matching the EUR 49 billion peak from 2022, with many Italian companies, often family owned, being more welcoming to partnerships with buyout firms and therefore creating numerous opportunities in an undervalued market.

These recent expansions of banks, private equity firms and corporate law firms in Milan have contributed to substantial economic benefits to Italy, contributing to job creation, firms hiring local talent. Furthermore, the surge in private equity investments has unlocked significant capital for Italian businesses, stimulating growth, innovation and operations efficiency. Lastly, Milan’s emergence as a financial hub strengthens Italy’s appeal to international investors. The city’s growing reputation attracts additional foreign direct investment, leading to increased tax revenues, thus enabling the government to invest in infrastructure, education and public services.

Expanding Demand for Luxury Goods

As more consumers seek out and desire luxury goods for their uniqueness and quality, the expanding demand continues to influence markets and drive competitive pricing.

Italy's luxury goods sector, which acts as a key part of its international image, has seen large growth as wealthy residents have moved in, driving up demand, and increasing the overall market. The country's luxury market thrives because brands like Prada, Gucci and Bulgari enjoy growing demand for their exclusive products, presenting its internationally well-known craftsmanship. Wealth concentration drives more purchases of luxury items. People are buying more expensive fashion cars, and jewellery.

Many emerging trends in sustainability and exclusivity are driving important growth in the sector and many businesses are actively changing to these important changes. Eco-friendly luxury is becoming a priority for wealthy buyers. This trend prompts brands like Gucci to create sustainable production hubs. People increasingly want personalized experiences. This desire includes bespoke tailoring, and artisan-made home furnishings. As a result, the demand has grown, and it has further fuelled this market. These offerings are seen by Italy’s elite newcomers as integral to the lifestyle promised by the country.

Real Estate Boom and Price Pressures

The influx of high-net-worth individuals (HNWIs) into Italy has reshaped its economy, particularly in luxury goods and real estate. A notable case study is Milan’s Via Montenapoleone surpassing New York’s Fifth Avenue to become the world’s most expensive street in November 2024. Prime property prices in hotspots like Milan, Lake Como, and Florence surged 4% in 2023, 16% up from 2019 levels. Properties in scenic or culturally rich areas, particularly those offering exclusivity and historical value, are in high demand. The introduction of a digital nomad visa in 2024 has further heightened interest, especially in urban centres like Milan and Rome, where hybrid work has boosted demand for high-end rental properties.

In the Milan, some of the most expensive apartments, such as those found in Porta Nuova and Brera, have seen price increases exceeding 20% over the last five years. Wealthy buyers restore historic villas and upgrade luxury properties, thus stimulating the renovation and construction industries. The rising demand for prime real estate is creating affordability challenges for middle-income Italians, with families that struggle with finding suitable housing options taking the brunt of these developments. Cities are seeing housing prices rise faster than wages, which drives gentrification and social divides, while UHNWIs are increasing supporting industries.

Broader Economic Impacts

High-end tourism, fine dining, private education and multiple personal services, including many concierge and chauffeur companies, have seen important benefits; at the same time, large investments have been received by ethnic and heritage sectors as many wealthy people are funding art restorations and generously donating to museums, consequent in support for Italy’s broader economy and strengthening its global reputation as a destination for luxury and culture.

However, such growth is not without its problems. It is hardly a secret that areas that experience an influx of wealth simultaneously suffer from increased cost of living, which furthers preexisting income inequality and intensifies the socio-economic divide. Despite these challenges, the overall impact on the Italian economy remains positive. Increased spending by wealthy residents and international investors contributes significantly to GDP growth, particularly in tourism-heavy regions. Moreover, continued interest in Italy’s unique cultural and lifestyle offerings ensures that it remains an attractive destination for the global elite.

Conclusion

The revision of the flat tax regime signals a pragmatic shift by the Italian government, aiming to balance economic growth with social responsibility. While the increased tax rate addresses immediate concerns, the broader success of this policy will depend on Italy’s ability to foster inclusivity. Investments in affordable housing, public infrastructure, and middle-class support will be vital for ensuring sustainable development. In the long term, Italy must maintain its competitive appeal while addressing the challenges posed by wealth concentration. By doing so, it can continue to benefit from foreign investment while building a more equitable and resilient economy. How Italy navigates these complexities will determine its success in this transformative era.
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Written by: Caterina Molinari, Ettore Marku, Jennifer Anastasia Povolotskaya, Laurian Pop, Paul Hartenfels

Bibliography

• Andersen UK
• Bain & Company
• Financial News London
• Financial Times
• Idealista
• Knight Frank
• Milano Finanza
• Nomad Capitalist
• OS Law
• Reuters
• Savills
• Tax Natives