World billionaires choose Italy for tax breaks and sweet living

An 18th-century Italian architectural masterpiece, Palazzo Raggi, close toRome's Spanish Steps, is coming back to life after years of neglect. Now this six-story building is preparing to welcome a new class of residents: foreign billionaires who have given up on Switzerland, Dubai or the Cayman Islands and moved to Italy to enjoy the "sweet life" and the financial benefits of an attractive tax system.

Italy offered a little-known incentive clause that applies to the super-rich of all nationalities in 2017. In exchange for an annual fee of €100,000 (£87,000), those who take up residence in the country are fully exempt from paying taxes on income earned abroad. The initiative also extends to family members for a fee of €25,000 a year per person.

The measure, designed to encourage big spending in Italy, whether on real estate or luxury brands, attracted 98 people in the first year, then grew to 549 by 2020 and more than doubled to 1,339 in 2021.

Their arrival has revitalized the market for luxury homes - buyers rarely leave less than 10 million euros - and helped renovate long-neglected historic monuments in city centers.

Nineteen of the 29 luxury apartments under construction at the posh Palazzo Raggi have been sold out since the sale began less than a year ago, and several have been purchased by those taking advantage of the flat tax.

"We've never sold this fast inRome," said Diletta Giorgiolo, head of residential real estate at Italy Sotheby's International Realty. "People want a piece of an 18th-century house, but with the interior completely modernized."

Georgolo had several busy years. The arrival of the super-rich began in2019 and was partly driven by non-resident individuals from the UK with a status similar to Italian, where they are exempt from paying taxes on income or capital gains earned abroad, fleeing because of the impending Brexit. This was followed by the coronavirus pandemic, an experience that forced many to reconsider their way of life.

Giorgiolo sold a property on the island of Capri to a French couple who turned it into a boutique hotel; a €20 million mansion in Venice sold to a Chinese buyer; and a €10 million mansion in Lallo, where George Clooney has a home, was bought by a couple from Switzerland.

The new flat tax clients also include a Dutch couple who bought a house inRome for more than €10 million and another couple who paid €11 million for a place inMilan.

“Some of them bought properties that had just come onto the market, while others purchased properties that needed renovation,” said Giorgolo. “Some rented the best properties during their first year in Italy before making a purchase. This has definitely been one of the best events for the premium real estate market.”

Marco Cerrato, a tax lawyer and partner at Maisto e Associati inMilan, is involved in financial matters for several new billionaire residents in Italy.

He said that foreign citizens who previously had non-resident status in the UK were at the forefront of this movement. "Brexit is one aspect, as the UK, especially London, has started to feel less welcoming," he said. "But a significant role is also played by the fear that a possible victory for the Labour Party in the next elections could lead to the cancellation of such tax benefits."

Among the super-rich, there are those who have moved from Switzerland, which also has a favorable tax system, as they are attracted by the lower living costs of Italy, its beauty, and warm climate.

Among them are investment bankers, asset managers, entrepreneurs, people working in the technology sector, or those who have income from dividends or trust funds.

“At the beginning of the flat tax system, the goal was those with passive income,” said Cherrato. “But then came those who work actively – they have to pay taxes on income earned in Italy – yet they still found this system appealing.”

In 2021, the Italian tax authorities collected 108 million euros from this initiative, while luxury brands are investing more in areas where the super-rich settle, primarily inRome, Milan, Florence, and Venice, as well as in the regions ofTuscany, Lombardy, and Liguria, and in the south, including Sicily.

Noto, a region in Sicily south of Catania, has attracted many wealthy buyers, said Giorgolo.

“Catania has very good air connections, so that has helped to develop interest,” she said. “So, if people need to be in the city, they focus on beautiful places like Sicily. But overall, interest across Italy has been explosive.”

The exhibition hall for the properties being sold at Palazzo Raggi attracts a steady stream of potential clients throughout the day. Since the building is scheduled for completion by the end of 2024, only sales brochures and promotional videos showcasing the terraces with stunning views ofRome, as well as visual materials displaying the stages of restoration work, are available to them.

Vincenzo Luppatelli, a sales manager at Sotheby's, cannot disclose details about his clients. But he said their demands are modest. "Palazzo Raggi is about class," he said. "There’s nothing glamorous, like jacuzzis and saunas. They also won’t bring a flashy car since there’s no garage. These are people who want to experience history but in a modern setting, and enjoy walks aroundRome. They also won’t have to deal with noisy neighbors, as an acoustic expert is working to ensure all the apartments are soundproofed."