Italy has granted non-dom status for the first time to an individual who is newly-tax resident in the country, as the competition among cash-strapped nations to attract and retain wealthy tax-payers heats up.
The individual in question, whose name, nationality and other details weren’t given, had previously been a UK-resident non-dom, according to Withers, the UK-based interntional law firm which assisted the individual with his application.
He was described by Withers as a “high-net-worth individual” with investments around the world who has been the director of several non-Italian companies, and who had decided “to move to Italy to take advantage of the new [non-dom status option] and to establish a new hub for his family”.
“He is a great illustration of how the Italian res non-dom scheme can be extremely attractive for internationally-mobile individuals,” said Giulia Cipollini, head of Withers’ Italian tax team, pictured left, who is based in Milan.
The news follows the introduction earlier this year by Italy of a new, non-dom tax regime, which seeks to boost the country’s tax coffers by offering newly-tax-resident individuals the opportunity to pay a flat fee of €100,000 annually (and €25,000 for each additional relative) on their foreign-sourced income, instead of taxing them on their worldwide income.
In order to qualify for this regime, the applicant has to have been non-tax resident in Italy for at least nine out the 10 years preceding their arrival in the country.
The regime is valid for 15 years.
It is described by Withers as combining with several other Italian tax incentives – “including one of the lowest levels of both inheritance and gift taxes in Europe, exemptions on capital gains on certain categories of real estate and art works and a new tax regime applicable to carried interest derived by fund managers” – to make Italy a potentially attractive destination for certain types of foreign investors and high net worth individuals.
Withers said its “cross border team” worked on the application in liaison with the UK and Italian tax authorities.
As reported here last December, setting the stage for a new era of tax exemptions for super rich expats was one of the last acts of Italy’s then-departing prime minister Matteo Renzi. The thinking was that bringing more high-net-worth individuals and UHNWIs to the country would bring needed cash to boost its depleted tax revenues.
In April, the Centre for Economic and Business Research sounded a warning about the potential loss to the UK economy that could result from the combination of changes to allowances being permitted to UK non-doms and the new option of being able to trade UK non-dom status for the sunnier, more tax-friendly shores of Italy.
While the changes to the UK’s tax rules for non-doms would give the UK’s economy an initial boost, its tax revenues could actually be hit longer term if two-fifths of those affected decide to leave the UK, the report, commissioned by Irwin Mitchell Private Wealth, noted.