Italy: Tax Dumping And Real Estate Bubble

On Tuesday, the day before the vote of confidence that led to the fall of his government and his resignation, François Bayrou, the former French prime minister, made a statement that angered the Italian authorities: "There is a kind of tax nomadism, which attracts taxpayers to countries with the most favorable tax laws. Italy is currently practicing a policy of tax dumping.“ Prime Minister Giorgia Meloni described his comments as ”astonishing."

Does Italian tax policy really attract billionaires? And what are the consequences for society and cities on the peninsula?

François Bayrou was referring to a measure introduced by former Prime Minister Matteo Renzi in 2016 and implemented the following year, which consists of a special tax regime for the ultra-rich. Once settled in Italy, the ultra-rich benefit from a capped flat rate, instead of paying tax calculated as a percentage of their income. Set at €100,000 under Renzi, this cap doubled under Meloni, making it still very attractive to the wealthiest individuals. Added to this is very favorable taxation on inheritance and assets held abroad.

The latest data released by the Italian Court of Auditors dates from 2023 and shows how, during that year, more than 1,500 ultra-wealthy foreigners benefited from the scheme, bringing €117.6 million into the Italian state coffers. That year, wealthy individuals who had previously resided in tax havens such as the Bahamas, Panama, and Cyprus moved to Milan, including 1,627 Americans, the highest number since 2003.

This trend shows no sign of slowing down: according to a recent study published by consulting firm Henley & Partners, around 3,600 millionaires from around the world are expected to move to Italy by the end of 2025, with an estimated total wealth of €21 billion.

This situation has given rise to a niche market of international investors who have injected huge amounts of capital into Italian luxury real estate. In several cities, and especially in Milan, the average price per square meter has risen sharply in a very short time, In the most chic neighborhoods of the Lombard capital, such as the famous “Quadrilatero della Moda” (home to major designer boutiques and luxury apartments selling for €40,000 per square meter), real estate prices have jumped by an average of 57% between 2021 and 2024.

As local families are gradually forced to move to the suburbs, new luxury economic migrants are increasingly investing in city centers.

In Rome, in just one year, apartment prices have risen by 7.4% and rents by more than 11%. The whole of Italy is facing this phenomenon. The most expensive cities remain Milan, Florence, Bologna, and Rome.

The real estate bonanza has attracted the attention of builders, who have sometimes even tried to take advantage of it to the point of breaking the law. In fact, for the past two years, magistrates have been conducting an in-depth investigation into the construction sector in Milan. A series of elements have been uncovered concerning alleged abuses in the construction of numerous new luxury buildings. The investigation also involves several local political figures, such as Mayor Giuseppe Sala.

The influx of investors and new foreign residents confirms Italy as an extremely attractive destination for people with significant capital. These include entrepreneurs, executives, investors, and personalities from the world of sports and entertainment. In addition to tax advantages, other factors such as quality of life and cultural heritage also play an important role.