“Leave and Pay a 26% Tax on Gains”: Europe, Once Courting the Wealthy With Tax Cuts, Moves to Tighten Exit Taxes as Asset Owners Relocate Abroad

Italy adjusts tax policy amid doubts over the benefits of tax cuts and mounting housing costs
Exit tax proposed following increases in flat tax for new arrivals
Norway and France also tighten exit-tax payment and exemption requirements

Italy, which has attracted wealthy foreigners with tax breaks, is moving to introduce an “exit tax” on wealthy individuals relocating abroad. As the influx of affluent residents raises housing costs in Milan and questions mount over whether tax cuts have attracted investment, the government, which has repeatedly increased the flat tax for new arrivals, is now seeking to tax unrealized gains held by wealthy people leaving the country. Moves to tighten taxation on wealthy individuals moving abroad are emerging across Europe: Norway has restricted deferrals of exit-tax payments, while France’s lower house has adopted an amendment tightening exemption requirements.

26% Tax on Unrealized Gains for Those Moving Abroad

According to the Financial Times (FT) on the 4th (all dates hereafter are local time), the Italian government is seeking to introduce an exit tax imposing a 26% levy on unrealized gains when people holding at least EUR 800,000 in financial assets move abroad. The coalition government led by Prime Minister Giorgia Meloni submitted the relevant provisions to parliament as part of next year’s budget bill. The tax would apply to people who were Italian tax residents for at least six of the 10 tax years preceding their move and whose taxable financial assets, including stocks and bonds, have a combined value meeting the threshold. If their departure causes Italy to lose its right to tax gains on those assets, the government would tax the difference between their market value at the end of the final year of residence and their acquisition cost for tax purposes, even if the assets have not been sold. The bill will be finalized following parliamentary deliberations, and the government has proposed January 1, 2027, as the effective date.

The bill also sets out payment deadlines and deferral conditions based on the destination country. In principle, the tax must be paid within 180 days of losing Italian tax residency. Those moving to a European Union (EU) member state or a country with agreements with Italy on exchanging tax information and cooperating on tax collection would be allowed to defer the remaining payment after paying 50% of the tax and providing adequate collateral. The deferral period would be five tax years for moves to EU member states and 10 tax years for moves to other eligible countries. If the assets remain unsold until the end of that period, the tax liability would lapse. Exemptions would also apply if, during the deferral period, the individual returns to Italian tax residency while retaining the assets, or the assets pass through inheritance. Any advance payment exceeding the final tax liability would be refunded.

Tax Breaks Scaled Back After a Decade of Courting the Wealthy

Over the past decade, Italy has pursued aggressive tax-cut policies to attract wealthy foreigners and high-income professionals. A leading example is the flat tax for new residents introduced in 2017. Under the scheme, people who lived abroad for at least nine of the preceding 10 years before transferring their tax residence to Italy pay only a fixed annual amount on foreign income for up to 15 years. At its introduction, the annual payment was EUR 100,000, meaning the greater a person’s foreign income, the larger the tax benefit. According to Italy’s Court of Auditors, about 1,500 people used the scheme in 2023.

Italy has also operated an income-tax relief scheme for returning Italians and foreign professionals. Under the system that took effect in 2024, only half of eligible arrivals’ employment and professional income earned in Italy is taxable, up to an annual income limit of EUR 600,000. The benefit lasts for five years starting in the year they transfer their tax residence, and applicants must meet requirements concerning prior residence abroad and professional expertise. The rules also exempt up to 60% of income for those who move with a minor child or give birth to or adopt a child while receiving the benefit and raise the child in Italy. These policies have helped make Milan and other major cities popular destinations for wealthy people worldwide.

But government tax policy is changing as opposition grows to the recent influx of wealthy people into Milan. The Meloni government doubled the annual flat tax for new arrivals to EUR 200,000 in 2024, then raised it again to EUR 300,000 starting this year. The two increases have tripled the annual payment for new arrivals compared with the scheme’s original level. The additional tax paid to include family members in the flat-tax scheme also rose this year from EUR 25,000 to EUR 50,000 per person annually. The increases apply to new arrivals, while existing beneficiaries retain the previous payment amounts applicable when they moved. On top of this, next year’s budget bill includes an exit tax on unrealized gains in financial assets held by people transferring their residence abroad. The approach appears designed to preserve existing beneficiaries’ flat-tax payments while applying higher taxes to new arrivals and establishing separate tax requirements for long-term residents moving overseas.

Table 1. Abolition of the UK’s Special Tax Regime and the Overseas Relocation of Wealthy Individuals

Overseas Relocations Rise as the UK Tightens Taxes on the Wealthy

Italy’s move to tighten taxation on overseas relocations comes amid intensifying competition across Europe to attract wealthy individuals leaving the UK. In April last year, the UK abolished the special “non-dom” tax regime for residents whose domicile for tax purposes was overseas. This also ended the benefit that allowed foreign income and investment gains to escape taxation if they were not brought into the UK. Under the new system, exemptions are limited to foreign income and investment gains during the first four years for new arrivals who were not UK residents for the preceding 10 years. In addition, inheritance tax was reformed on the basis of residence history, bringing overseas assets held by people who have lived in the UK for at least 10 of the past 20 years within its scope. As the tax reforms took full effect, a succession of finance professionals moved abroad. In April last year, plans by Goldman Sachs Vice Chairman Richard Gnodde to relocate to Milan also became public.

The trend of leaving the UK is also evident in company executives’ filings reporting changes of residence. An FT analysis of UK Companies House data found that 3,790 company directors reported moving overseas between the announcement of the October 2024 budget and July last year, up about 40% from the same period a year earlier. In April last year, when the special tax regime was abolished, 691 directors relocated—the highest monthly total during the period. Ultrawealthy individuals have also continued to move. According to figures Bloomberg compiled last month using its Billionaires Index, wealthy individuals who have left the UK or reduced their ties to the country since 2024 held a combined USD 160 billion.

Wealthy Individuals Head to Dubai and Greece

Their destinations have included Monaco, Switzerland and the United Arab Emirates (UAE), with the UAE appearing most frequently in relocation filings by UK company directors. The UAE imposes no personal income tax and offers renewable five- or 10-year golden visas to investors and professionals who meet certain requirements. The approach encourages wealthy individuals to settle by reducing their tax burden and ensuring long-term residency. According to Henley & Partners data cited by Dubai’s investment authority, Dubai was estimated to have 81,200 resident millionaires at the end of 2024, up 102% from 2014. Asset managers and hedge funds have also continued to establish a presence there. According to the Dubai International Financial Centre (DIFC), the number of asset and wealth management firms based there exceeded 500 at the end of last year, up 22% from a year earlier, while the number of hedge funds reached 102.

In Europe, Greece has emerged as a new base for wealthy people leaving the UK, drawing them with a flat tax and investment-attraction schemes. Since 2019, Greece has operated a program offering eligible new residents benefits for up to 15 years in exchange for an annual payment of EUR 100,000 on foreign income. Applicants must invest at least EUR 500,000 in local real estate, businesses, securities or other qualifying assets and must have been nonresidents of Greece for tax purposes for at least seven of the eight years before moving. In September this year, reports emerged that Chris Rokos, founder of hedge fund Rokos Capital Management, planned to move his residence from the UK to Greece and establish an office in Athens. The decision by a major figure in British finance to choose Greece also drew attention to the country’s policies for attracting wealthy residents.

Closing Tax Gaps Created by Wealthy Individuals Moving Abroad

As competition to attract wealthy individuals intensifies, domestic opposition to tax breaks has become a burden for Italy’s government. Housing demand from wealthy arrivals in Milan has fueled rising property prices and rents, increasing residents’ dissatisfaction with preferential tax treatment for affluent foreigners. Combined with rising energy prices, this pushed Italy’s consumer inflation rate to 5.6% last month, while protests against soaring living costs took place in major cities including Rome and Milan. As discontent over the sharp rise in living costs spreads, maintaining preferential tax treatment for the wealthy has become a greater political burden for the Meloni government ahead of elections.

Critics have also questioned whether tax cuts for the wealthy have delivered the productive investment they were originally intended to attract. In its review of the national accounts this year, Italy’s Court of Auditors assessed that the flat-tax scheme appeared to benefit people with foreign income who moved for employment or personal reasons, rather than attracting new investors. In fact, 48.4% of beneficiaries in 2024 reported income generated in Italy, and employment income accounted for 73% of the domestic income they declared. The Court of Auditors stressed that it had not been verified whether reducing arrivals’ tax burdens had led to new productive investment. It also said the economic benefits must be examined to determine whether they justify preferential tax treatment, given the potential for serious disparities in taxation among taxpayers. In May, calls also emerged in the Italian Senate for the release of data on the policy’s results, citing the lack of any substantive requirement linking flat-tax benefits to productive domestic investment. The requests included annual beneficiary numbers, the scale of foreign income, estimated tax liabilities under ordinary taxation, and data showing the actual investment generated.

Experts expect the trend of introducing exit taxes or tightening related rules in response to wealthy individuals moving abroad to spread across Europe. Norway, which levies a wealth tax, tightened its exit-tax rules in 2024, ending the option of indefinitely deferring tax payments on unrealized gains and requiring payment, in principle, within 12 years of departure. In particular, anyone receiving dividends during a payment deferral must, in principle, use 70% of those dividends to pay down outstanding exit tax. On the 30th of last month, France’s lower house also adopted an amendment during deliberations on next year’s budget bill to extend the shareholding period required for an exit-tax exemption from the current two to five years to 15 years. The aim is to prevent people from avoiding tax by holding assets for a certain period after moving abroad and then selling them.