Italy's draft exit tax puts a 26% charge on departures, muddying its pro-wealth pitch

What the proposal says

Italy is advancing a plan to tax unrealized capital gains at 26% when someone with more than €800,000 in financial assets moves their tax home outside the country. The measure is still moving through parliament.

It would apply to Italians and to non-nationals who qualify as long-term residents after at least six of the past 10 years in Italy. There is a deferral option for moves to an EU country or a state with an accord with Italy: pay 50% up front and, if no sale occurs in a five- to ten-year window tied to the destination country, that prepayment would be returned.

The government pegs the take at €3.4 million in the first year, rising to €6.7 million a year for the next four, with the figure reverting to €3.4 million thereafter. Set beside a roughly €26 billion budget, it is a slim figure.

Who it would hit and who it probably would not

The flat-tax regime that drew many wealthy foreigners would mostly sit outside the proposal because participants typically keep portfolios abroad. That regime lets an individual pay a fixed €300,000 each year on foreign-sourced income, and those foreign-held assets would generally not be caught by the exit charge.

By contrast, Italians and long-term residents with in-scope holdings could face the levy. The draft could also touch people who used Italy's impatriation scheme, which offers generous income-tax breaks to professionals who moved or returned after time overseas.

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Reactions from advisers and residents

The sharp shift is stoking concern about policy stability. "As it is currently drafted, it looks a lot like a convoluted form of wealth tax and gives the impression that the country is becoming a golden prison for the rich," said Francesco Guelfi, a partner at A&O Shearman in Milan. He added that inquiries have been pouring in from finance professionals and from individuals who returned to Italy under the scheme, anxious about the proposal's impact on them.

Under the new proposal, the unrealized appreciation would be taxed at departure.

Why this matters for investors

For roughly a decade, Italy wooed the wealthy and returning Italians with generous tax breaks, and Milan has seen an influx of financiers and investors. The country has benefited from the UK's tax hikes on affluent residents and its central European location, drawing high-profile names like former Reckitt Benckiser executive Bart Becht and Nassef Sawiris, described as Egypt's second-richest person, both of whom relocated from the UK to Italy. The exit-tax draft complicates that pitch, even as other countries run their own versions of departure levies - France on shares and securities above €800,000, Spain on investments over €4 million, and the US for people worth more than $2 million who give up citizenship or permanent residency.

With general elections next year, Prime Minister Giorgia Meloni is targeting the rich at a moment when average Italians face 5.6% inflation and stagnating wages, pressures that recently fueled protests across the country. The bottom line: the expected revenue is tiny, but the signal about future rules is not. If Italy figures into your plans, watch the residency tests, the EU deferral mechanics, and how unrealized gains could be taxed at the exit.

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