The Up- and Downsides of Living Rich in Italy

High-net-worth individuals (HNW) often seek tax havens, and Italy, with its appealing lifestyle and favorable tax benefits, has become a prime destination for the affluent. My dad (may he rest in peace) always used to say our family was like the Tribes of Israel, despite the fact that we had no Jewish ties and were firmly of French-Canadian descent. He and my mother named me Elisabeth, and with Bertrand as my family name, our French heritage is undeniable. The only things American about me these days are my passport, my voting rights, and my middle name: Jane. With such ancestral roots, it’s no surprise that it became a family tradition to sail the seas and paint the skies. 

As a result, I’ve lived in California, the Netherlands, Belgium, France, and Italy. Some have called me an expert on Italy, having crisscrossed the country for many years and staying in places like Milan, Tuscany, Rome, and Genova. However, I have never belonged to the special class of high-net-worth individuals who move somewhere to reduce their tax burden. Just so you know, it’s not fair—I work very hard too.

Reading up on the subject of tax havens in the Financial Times last Sunday (8-9-2024) made me realize that perhaps I can throw in my two cents (no pun intended). So let’s start with the two most coveted cities in Italy: Milan and Rome. They have long been a magnet for affluent individuals attracted by their culture, lifestyle, and, in recent years, tax benefits. However, when compared to other global hubs like London, Dubai, Miami, Monaco, and Singapore (except for Miami, I have been to all of these cities), Italy presents both unique opportunities and challenges for high-net-worth individuals. Let’s explore the pros and cons of living in Italy for you, and how it compares to other top destinations from my own experience.

Rome is on the lower end of the real estate scale, but there are very few suitable apartments available in this market, and new constructions are rare. Real estate in Italy is quite unique because the best properties tend to stay within families, especially the larger family-sized apartments. Italians hardly ever move—that’s just the norm in Italian culture. Now, let’s take a look at the pros and cons I’ve written up.

Pros of Living in Italy

1. Favorable Flat Tax Scheme

• Pros: Italy’s flat tax scheme, introduced in 2017 and increasing to €200,000 per year in 2024, offers a significant draw for wealthy foreigners. This flat tax applies to foreign-sourced income, making it highly attractive for expatriates and retirees with international assets and earnings. Family members can also be included for an additional €25,000 per year.
• Comparison: While Monaco offers tax-free living, destinations like London and Singapore do not provide such tax incentives. Italy’s flat tax makes it more competitive against cities like Dubai, which also offers tax advantages but lacks the same lifestyle and cultural depth.

2. High Quality of Life and Cultural Richness

• Pros: Italy is renowned for its high quality of life, offering a rich cultural heritage, world-class food, and access to beautiful landscapes such as the Italian Riviera, the Alps, and the iconic Lake Como. Cities like Milan and Rome combine urban sophistication with proximity to natural beauty, creating a balanced lifestyle for high-net-worth individuals.
• Comparison: While cities like Miami and Dubai boast modern luxury and glitz, Italy provides a deeper connection to art, history, and tradition. Unlike the fast-paced lifestyle of London or New York, Italy offers a more relaxed and culturally enriching experience, particularly appealing to those seeking a slower pace.

3. Proximity to International Travel Hubs and Top Destinations

• Pros: Milan is a well-connected hub with three international airports (Malpensa, Linate, and Bergamo), making it convenient for international business and leisure travel. Additionally, Milan’s proximity to the Alps for skiing and the lake region (Como, Garda, Maggiore) offers easy access to luxury retreats and outdoor activities.
• Comparison: Other cities like Monaco, while luxurious, do not offer the same breadth of international connectivity. Singapore and Dubai are major travel hubs but are more distant from Europe and the Americas, making Italy a more central location for global travel.

4. Growing Luxury Real Estate Market

• Pros: Milan, in particular, has seen a surge in demand for high-end properties, with new developments and renovations in areas like Porta Nuova and Quadrilatero. Italy’s luxury real estate market is still more affordable compared to Monaco or London, making it a strategic investment opportunity for the affluent.
• Comparison: Property prices in Milan are high, but still considerably lower than those in Monaco or central London, where prices per square meter can reach astronomical levels. This makes Italy a competitive option for buyers looking for luxury at a more reasonable cost.

Cons of Living in Italy

1. Limited Availability of Luxury Properties

• Cons: One of the biggest challenges in Milan is the limited inventory of luxury properties. The most desirable areas are small and highly competitive, with few new developments and a focus on older buildings that may require extensive renovation. This makes it difficult for wealthy buyers to find suitable homes.
• Comparison: In contrast, cities like Dubai and Miami have seen explosive growth in luxury real estate, offering a wider variety of modern, turnkey properties with high-tech amenities. London, while expensive, also offers a broader selection of high-end homes across different neighborhoods.

2. Fewer International Schools:

As a product of international schools, I can tell you a thing or two about them. Unfortunately, they are not all created equal. My most poignant advice would be to ensure that the school has a solid reputation. Personally, I don’t favor ‘new’ schools—in fact, I was once kicked out of one because they had no students or funds for a fifth year! This sent my parents into a frenzy, scrambling to find another school where I could finish high school, which also didn’t end well and wasted a lot of my time. But that’s perhaps a story for another day. Also, beware that your kids might grow up speaking ‘The King’s English’ and later be mistaken for Bostonians when back in Los Angeles. While you might find that idea interesting, it does lead to a lot of ‘So, where are you from?’ and ‘That’s so exotic!’—not particularly useful for a girl in her dating life.

• Cons: For wealthy expatriates with children, the limited number of international schools in Milan and Rome can be a significant drawback. The competition for places in prestigious schools like the American School of Milan is fierce, and the choices are far fewer than in cities like London, Singapore, or Dubai, which boast a wide range of top-tier international education options.
• Comparison: Cities like Singapore and Dubai are known for their extensive network of international schools, catering to families from all over the world. London also offers a vast selection of elite private schools, making it a more favorable destination for families prioritizing education.

3. Higher Taxation on Domestic Income

• Cons: While Italy’s flat tax scheme is highly advantageous for foreign-sourced income, domestic income remains subject to Italy’s progressive tax rates, which can be quite high. This makes it less appealing for individuals who plan to generate substantial income within Italy.
• Comparison: Monaco remains tax-free for residents, and Dubai offers a tax-free environment for all income, making them more attractive for individuals looking to avoid taxation altogether. Even London offers certain tax advantages for non-domiciled residents, albeit with more complex rules than Italy’s flat tax.

4. Bureaucracy and Slow Administrative Processes

• Cons: Italy is notorious for its complex bureaucracy, which can be frustrating for individuals trying to buy property, start businesses, or manage investments. The process of acquiring permits, dealing with local authorities, and navigating legal requirements can be time-consuming and cumbersome.
• Comparison: Dubai and Singapore, in contrast, offer highly efficient and business-friendly environments with streamlined processes for property acquisition, residency, and business setup. This makes Italy less attractive for individuals seeking quick and hassle-free relocation.

Conclusion: Is Italy the Right Choice for the Wealthy?

1. Italy

• Flat Tax: €200,000 annual levy on foreign-sourced income for new residents (Knight Frank) (IFC Review).
• Additional family members: €25,000 per person.
• Duration: Up to 15 years.
• Attraction: No need to declare foreign income in Italy, exemption from wealth and inheritance taxes, making it a strong contender for wealthy expats, particularly those with substantial foreign income.

2. Monaco

• Tax System: Monaco does not impose any personal income tax (Eastern Region Group).
• Benefits: No capital gains tax or wealth tax, making it one of the most favorable destinations for ultra-high-net-worth individuals. Residency is highly desirable, though real estate prices are the highest in Europe.
• Drawbacks: High property prices and limited availability.

3. Dubai (UAE)

• Tax System: No personal income tax (Eastern Region Group).
• Benefits: Complete income tax exemption for residents, making it attractive for entrepreneurs and expatriates. Corporate taxes are generally limited to specific sectors, like oil and foreign banks.
• Drawbacks: While attractive, Dubai’s appeal may be limited to those seeking a more business-centric environment.

4. United Kingdom (London)

• Non-Dom Status: The UK offers a special status for non-domiciled residents, allowing them to pay tax only on UK income and not foreign income​(IFC Review).
• Changes: Recent reforms have made it less appealing than before, pushing many wealthy foreigners to seek alternatives in places like Italy or Monaco.

5. Singapore

• Tax System: No capital gains tax and a flat income tax rate of around 22% (IFC Review).
• Attraction: With strong financial incentives and a robust economy, Singapore is appealing to high-net-worth individuals, especially in business.

But let’s face it—Italy isn’t for everyone. While it has the allure of Renaissance art, rolling vineyards, and that irresistible “dolce vita” vibe, it also comes with a few headaches that might leave some high-net-worth individuals wondering if it’s worth the hassle. First off, good luck finding that perfect villa in Milan or Rome without pulling some serious strings or waiting for an inheritance. The luxury property market here is, well, a bit of a family affair. The best homes stay within families for generations, and when something desirable finally hits the market, you’ll find yourself in a fierce bidding war.

And if you’re moving with kids, here’s where it gets tricky. Italy’s international schools are certainly respectable, but don’t expect the same vast selection you’d find in London or Dubai. In cities like Milan, you’ll be choosing between a few solid options, but competition for places can be stiff, and you might end up crossing your fingers during the application process. As I’ve mentioned before, international schools are not all made equal, and navigating that world is a challenge of its own.

Then there’s the bureaucracy. Italy’s love for paperwork is legendary. Whether you’re buying property, setting up a business, or even just renewing a permit, expect delays and a fair share of frustration. The wheels of Italian administration turn slowly, and it’s not uncommon to feel like you’re stuck in a never-ending loop of signatures and stamps. This can be particularly exhausting if you’re used to the efficiency of Singapore or the streamlined processes of Dubai.

That said, if you’re someone who values a culturally rich life, stunning natural beauty, and don’t mind the occasional speed bump in the form of red tape, Italy might just be your paradise. For those seeking balance—where lifestyle takes precedence over pure convenience—Italy remains an appealing choice. After all, sipping an Aperol Spritz by Lake Como or exploring Tuscany on a sunny afternoon has a certain charm that not every place can match.

In the end, it’s all about what you’re looking for. If you’re ready to trade skyscrapers and fast-paced efficiency for historical charm and a life that savors each moment, Italy is calling. Just be prepared to play the long game when it comes to real estate, and don’t forget to keep your patience handy—it’ll come in useful.

Written by: 

Elisabeth Bertrand

Category: Articles

Published: 08 September 2024

Last Updated: 08 September 2024

• Source: Condé Nast Traveller