HOW ITALY IS ATTRACTING HIGH EARNERS WITH A 50PC TAX DISCOUNT
Italy’s flat-tax scheme to attract wealthy foreigners has grabbed attention for persuading a cohort of bankers to decamp from London to Milan. Although rather over-stating its significance, it’s been dubbed “svuota Londra”– which translates to “empty London”.
However, another tax incentive that’s been around since 2011 has drawn ten-fold more talented professionals to move to Italy. And it has arguably had more impact.
The “Rientro dei Cervelli” – literally the “return of the brains” – scheme was designed to get highly skilled workers to the country by offering lower income tax rates. These have fluctuated, but between 2019 and 2023 those moving to the south of Italy could pay tax on only 10pc of their income, or for those going north, 30pc.
The scheme, also known as the “lavoratori impatriati” or “inbound workers” tax regime, was made less generous in December 2023. If you move to Italy, you’re now charged tax on half of your income. Yet the move remains much in demand, according to tax experts and relocation advisers.
“Requests are increasing despite the amendments, with an increase from the UK since the abolition of the non-dom regime,” says Filippo Molinari, of Withers, the private client law firm.
“According to the Italian ministry of finance, by 2023 around 50,000 people were on the regime. We are seeing 50pc split in returning Italians and new non-Italian residents.”
In contrast, only around 4,000 people have applied for the €200k (£173k) flat-tax regime.
The “inbound workers” tax regime has boosted the immigration of high earners, according to Giuseppe Ippedico, an expert on talent migration at the University of Nottingham.
“At least one in four Italians would not have returned if the incentive was not in place. It has reversed the migration trend and brought human capital, predominantly to the big cities of the north of Italy, and Rome,” he says.
The average salary of those using the regime was €112,443 compared to the national average of around €32,000.
How does the scheme work?
Following its launch in 2015, the “impatriati” scheme rules are now stricter: regional differences have been scrapped and new residents anywhere in Italy can get a 50pc tax exemption for up to five years.
In either case you cannot benefit if your earnings are over €600,000 per year, and you are still liable to pay social security contributions – which are 9pc of your gross salary, capped at €120,000.
Applicants must not have been resident in Italy for three years (six to seven years if transferring with the same company), and they have to stay in the country for four years – or they’ll pay some of the benefit back. Before the 2023 amendment, these timeframes were three years and two years, respectively.
Another requirement that’s been introduced is needing to have higher education qualifications, or an EU Blue Card – a work and residence permit for non-EU highly qualified workers, to be eligible.
According to Molinari, 95pc of people on this regime are employees – mostly of companies in Italy’s business and industrial hubs of the north – Padua, Milan, wider Lombardy and north-east – and Rome.
“You cannot be a globe-trotter on this regime,” he says. “You can be employed remotely but you have to be resident and work in Italy at least 183 days per year. It’s not popular with self-employed people mainly for red tape reasons.”
He adds that you have to be in Italy for four consecutive tax years, and because the UK tax year is different, you may need to coordinate your move to maximise tax savings.
“The more-stringent rules mean those less certain of Italy will be wary of committing to four years, although this is less an issue for returning Italians,” says Daniel Shillito, of D&G Property Advice.
This regime is only available to people who have the right to live and work in Italy – EU citizens, or people with visas that allow work. He says that an employer-sponsored work visa is the most common, although he has a client currently applying for the digital nomad visa.
When the five-year tax reduction period ends you will revert to normal tax rates if you stay in Italy: if you are earning €150,000, you will jump from paying €24,890 a year to €57,140 – or 17pc tax up to 38pc, according to Shillito. Both figures exclude social security contributions.
“The only exception is if you move with an under-18 child – or have adopted a child while on the scheme – in which case the tax exemption discount is 60pc,” says Federica Grazi, of consultancy Mitos Relocation Solutions.
‘A well-kept secret’
Currently benefiting from the pre-2023 rates is Daria, 36, who did not want to use her surname. She had been living happily in Hackney, east London, for 13 years. She is a naturalised British citizen working remotely in tech sales.
At the end of 2023 she and her partner, a commodities trader, moved to Bari in Puglia, to benefit from the 90pc exemption for 10 years – just before the rules changed.
“When travelling we met people who were optimising their finances. Some were going to Dubai, but my work is in Europe and we heard about the “impatriati” scheme and realised it was a bit of a well-kept secret,” Daria says.
The couple considered Amalfi too touristy and Napoli too hectic, but fell in love with the architecture and lifestyle of Bari, on the Adriatic coast.
They are renting a two-bedroom flat for €1,400 a month, which Daria says is expensive for Bari – but she equates the location to “living next door to the Albert Hall [in South Kensington]”. The couple often swim or paddle-board past the city’s historic waterfront before work.
“We found it refined, safe and cultural. It would be very hard to find work here, but we don’t need to,” she says. “It’s changing fast and we’ll invest in a property here. But we’re not sure beyond that... Connecting with people is hard, so it’s a bit lonely after London.”
‘Tuscany felt like early retirement’
The picture isn’t always rosy, however. In idyllic locations we might love for holidays, a low-tax life can pall. Swedish-born Lars*, 39, experienced this first-hand when he moved from London to Tuscany, classed as northern Italy, for the tax regime between 2022 and 2024.
The British citizen employed by a software-engineering company, which has office in Italy, lived in the Florentine hills and then Lucca.
“It’s a beautiful place. And the slower pace was perfect for a while, but started feeling like semi-retirement, which we felt too young for,” says Lars.
He also mentions the language barrier and “nightmare paperwork” as downsides to the move.
It wasn’t all bad, though. “I was taking home 83pc of my gross salary, rather than the 55-60pc I was taxed back in London, which gave us a significantly increased quality of life,” he says.
Lars and his wife saved money and are now back in the UK. They’re hoping to upsize from their London flat soon.
‘Returning to Italy felt like a step back’
Two years in Italy was also enough for Francesca Inglima, who moved back to her native Milan between 2021 and 2023.
She had been living in central London for 10 years working for top-tier investment banks. “I had a lot of European clients. The tax incentive made it a no-brainer,” says the 32-year-old.
But a career change brought her back. “I wanted to set up a business and Italy was not the place to do it.” Inglima studied at Sotheby’s and set up Bianca Arte, an advisory business for contemporary art.
“After London, returning to Italy felt like taking a step back. I missed the fast pace, the ambition, the easier bureaucracy. Also the ‘impatriati’ scheme would not work for me going self-employed,” she explains.
“I pay more tax now, but my quality of life is better.”
Inglima is not the only one frustrated by her home country’s red tape. “While moving back to Italy as an employee offers clear lifestyle and tax benefits, relocating as an entrepreneur means heavy bureaucracy and rigid employment laws,” says Grazi, who is also Milanese – and now a UK citizen.
She says that the incentives are there, but they’re temporary – as per some other low-tax schemes elsewhere.
“Moving your life and business can’t be based on a short-term tax break alone.”
The Italian government’s frequent changes to the regime also makes it hard to make long-term plans. “People need predictability,” says Ippedico. “Italy needs systemic reforms to make it easier to do business. More needs to be done to make these people stay on after five years.”
That said, such preferential tax regimes have had economic benefit, says Federico Salmoiraghi of Off Italy Consulting. “They transform Italy from a high-tax, low-mobility destination into an internationally competitive location.”
Of course, for many more others the lifestyle appeal of Italy, low-tax or otherwise, will be enough.
*Names have been changed
2025-07-31T13:01:04Z