Italy doubles billionaires' 'flat tax', decries tax havens

By Marta Di Donfrancesco and Angelo Amante

ROME (Reuters) -Italy's government approved a measure on Wednesday that doubles to 200,000 euros ($218,220) per year a "flat tax" applied on income earned abroad by wealthy individuals who transfer their tax residence to the country.

The favourable tax regime for rich new residents was introduced by a centre-left government in 2017, with a view to luring ultra-high spenders to boost Italy's sluggish economy.

The scheme, which Economy Minister Giancarlo Giorgetti said had prompted 1,186 relocations to the country so far, has been under particular scrutiny since Britain's decision to end its centuries-old regime for non domiciled ('non dom') residents.

Britain's previous conservative government decided to abolish the 'non dom' regime after April 2025.

Giorgetti told reporters Italy was now against the idea of countries competing with each other to offer "fiscal favours" to the wealthy.

"Like we said at G20 and G7 meetings, we're against engaging in a competition with other countries to create tax havens for people or companies. A country such as Italy, with limited fiscal room, can only lose such a competition," he said.

Tax advisers said Italy is expected to become the new home of many wealthy 'non dom' British residents looking to preserve their offshore income from higher taxation.

"We are working with a number of clients who are considering relocating from the UK to Italy for tax reasons," said Vito Di Pede, a tax adviser at Milan's Studio Rock tax and law firm.

Italy's decision could make a small contribution to Rome' public finances as Prime Minister Giorgia Meloni prepares a 2025 budget aimed at narrowing the country's wide fiscal gap.

The doubling of the flat tax will only apply to people signing up to the option in the future, the decree spells out, sparing those who have already moved their tax residency to Italy.

One high profile beneficiary of the scheme was Portuguese soccer star Cristiano Ronaldo, who became an Italian tax resident when he played for Juventus between 2018-2021.

Italy's audit court has estimated that between 2018 and 2022 taxes paid under the scheme amounted to 254 million euros.

The EU criticised the measure as unjust and detrimental to state accounts.

"The high-net-worth individuals regimes of Greece and Italy are ... the most harmful because they offer large exemptions to extremely rich individuals", the bloc's Tax Observatory said in its Global Tax Evasion Report this year.

($1 = 0.9165 euros)

(Additional reporting by Valentina Za and Giselda Vagnoni; Writing by Francesca Piscioneri, editing by Gavin Jones)