Is Italy all La Dolce Vita for investors, UHNWIs and family offices?

Rome: In today’s fast-paced world, where families are spread across the globe and businesses operate in multiple geographies, the demand for flexible and innovative wealth structuring and taxation solutions has soared.

Several countries have identified this shift and started offering financial incentives to capture this demand. Some countries are also lucky to have other factors that pull in foreign investors, such as stable governments, healthcare, and various lifestyle and quality of life factors.

There are, however, also factors pushing wealthy individuals out of countries. Some recent examples include the current new Norwegian wealth and exit tax or just the high tax burden of other European countries like France with a high inheritance tax.

Beyond the EU, many foreign nationals are looking for ways to enter the EU. With countries like Portugal stopping their investor programme, which has traditionally been a favourite, a new demand is created. And the recent announcement that the UK Labour Party is considering modifying the UK non-domicile tax regime
Today, many young entrepreneurs and investors look at the world differently, not only from the perspective of maximizing wealth structuring and tax havens but also valuing lifestyle, social factors, and healthcare. Italy’s allure for ultra-high-net-worth individuals and family offices includes picturesque landscapes, great food, fashion, and a rich cultural tapestry. However, it also extends beyond that.

Italy offers several tax-optimized routes to enter, from a highly skilled programme to attract knowledge to investor visas and wealth relocation or non-domicile schemes. For UHNWIs who want to relocate, there is a flat tax on foreign income for new residents at €100,000 annually, a scheme designed to attract individuals seeking to optimize their tax exposure while enjoying the benefits of European residence. These benefits, coupled with regulations facilitating gifting and donations, position Italy as an attractive jurisdiction for wealth structuring.

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Mr. Andrea Caraceni, who heads Corporate Family Office SIM, an Italian multi-family office, says, “You come to Italy to live. Other jurisdictions are more like safe prisons where you sleep but wake up and want to go somewhere else.” Caraceni highlights the dual appeal that there are several markers of stability, including the country’s commitment to honouring government bonds and an excellent public healthcare system and the appeal of Italy as both a “safe and onshore Tax Heaven.”
Marco Mesina, a young Private Client Lawyer at Studio Tributario e Societario Deloitte, agrees, “We’re seeing an increased wealth migration that follows the global trend of UHNWIs relocating to different jurisdictions for personal, business and geopolitical reasons.”
According to Mesina, some UNWIs apply the special scheme not only for ordinary tax aspects but also as a form of wealth and inheritance planning for their children. The scheme also covers inheritance and gift taxes for foreign assets, which, in any case, is only 4% for regular taxpayers. Mesina believes this makes Italy a tax heaven for inheritance taxes. In addition, many family offices are eyeing Italy for family business reorganizations; under specific requirements, children can receive their parent’s business completely tax-free.

At the same time, only some people share the sweet view of Italy, and others believe that the high quality of life comes with challenges, including a complex business environment and a potential future lack of talent.

Recent articles and discussions highlighted a net outflow of skilled young youths, and Italy’s having one of the highest turnovers of governments in the G8, arguing that this demonstrates the Italian environment is more politically unstable.

This contrasting view underscores the necessity of weighing the comprehensive landscape when choosing a domicile. And when looking for alternatives, Italy immediately goes up against its neighbour, Switzerland. Being mainly Italian-speaking, Lugano has been built up largely around the wealth management needs of Italians who want a Swiss base for their wealth.

Given the existing challenges, The question arises: how can Italy enhance its appeal as a potential hub for family offices? Improving political stability, increasing financial literacy, and reducing the fiscal burden on businesses could significantly enhance Italy’s attractiveness. Efforts to open more to international markets, simplify the tax system, and foster a more business-friendly environment are essential steps toward making Italy a more viable choice, and according to Ernesto Lanzillo, Deloitte DCM Private Leader, this is underway, “The interaction between private companies and the local and central governmental bodies is an element on which Italy works to empower entrepreneurs and make Italy more attractive.”

The decision to base a family office or structure wealth in Italy is multifaceted. Choosing Italy as a wealth domicile is not a one-size-fits-all decision but a strategic choice that has to consider fiscal benefits, the business environment, and political and lifestyle preferences before weighing up regional preferences between Rome for its history, Milan for design & fashion or Puglia for food and wine. The question remains whether Italy is all La Dolce Vita.