As Rome proposes a charge on wealthy residents who leave, advisers say Italy may become a less popular place to settle. For buyers weighing where to base themselves, Marbella’s case rests on more than tax
Italy and Spain compete for much of the same international buyer: families and entrepreneurs who want a home in the sun, good schools, strong connections and a settled way of life. So when one government changes the terms for wealthy residents, the other market takes notice.
At the weekend, Prime Minister Giorgia Meloni’s coalition submitted a draft budget to parliament that includes an exit tax. As reported by the Financial Times, it would impose a 26 per cent tax on paper profits accrued by people with assets of €800,000 or more who decide to leave Italy. It would apply to those who were Italian tax residents for six of the ten years before their departure, and could be refunded if the financial assets are not sold for some years after they leave. It is a proposal, not law, and it is at an early stage of the legislative process. For Kore Estates Private Office, a Marbella advisory with more than 20 years of experience on the Costa del Sol, it matters beyond Italy.
Where someone chooses to live is one of the most important decisions they will make, and tax is only one part of it. But predictability matters to every buyer we advise. A decision about where to settle is easier to make when the rules are clear, both on the way in and on the way out.
How advisers are reading it
The wealth advisers quoted by the Financial Times were direct. Tim Stovold, head of tax at Moore Kingston Smith, said the measure “is going to make Italy a much less popular destination for individuals to make their long-term home”. Charlie Sosna, head of private wealth and tax at Mishcon de Reya, said it is “going to have a lot of clients who have relocated there, or based there generally, very nervous”, adding that clients were already anxious about Italy as “unstable, unpredictable”.
The proposal also leaves questions open. Maurizio Fresca of Chiomenti said many aspects were ambiguous, including how the tax would relate to the flat tax and other incentive schemes, and whether it applies only to assets held in Italy or worldwide, though he expects clarification in the coming weeks. It is also worth keeping the measure in proportion. Italy expects to raise only around €3.7 million next year, rising to just over €6.7 million, which suggests it is aimed at a small group of very wealthy leavers. For most buyers it will make no difference at all.
Italy’s pitch to the wealthy
For the past decade, Italy has positioned itself as a tax-efficient home for wealthy newcomers, and as a serious alternative to Spain. Its flat tax, launched in 2017 at €100,000 a year, allows new residents to pay a single annual levy on their overseas income and assets for up to 15 years. Rome has also offered tax breaks to newly arrived professionals, including Italians returning from abroad, who pay income tax on only a portion of their salaries for five years. The result has been a wave of affluent arrivals, particularly in Milan.
That pitch has been changing. The flat tax has twice been raised in the past two years and is now €300,000 a year for newer arrivals. The exit tax would add a cost on the way out. Taken together, they show a country that has made it more expensive to arrive and, if this proposal is enacted, more costly to leave. Italy’s appeal remains considerable, but for a buyer comparing destinations, the cost of entry, the cost of exit and the stability of the rules all belong in the calculation.
What it means for Marbella
For internationally mobile buyers who looked to Italy for its tax regime, the proposal is a reason to look again, and Marbella is a natural place to do so. It offers a settled, internationally minded community, outstanding connections and a way of life that has drawn buyers from across the world for decades.
The comparison, however, is not like for like, and it should not be made on assumption. Spain has its own tax system, including taxes on wealth and on large fortunes, and its special regime for new arrivals is shorter and more closely tied to employment than Italy’s flat tax. Residency, income, assets and succession all need to be considered together, and the right answer will differ from one family to the next.
Two points are worth making clearly. First, the Italian proposal concerns leaving Italy and changing tax residence. A buyer who purchases a second home in Marbella without changing their tax residence is not affected by it. Second, an Italian resident considering a permanent move to Spain should take advice in both countries before doing anything, because the order and timing of a move can matter.
This is why we always advise speaking to a tax expert before making any decision. A good adviser will look at your own position, in both countries, and help you decide whether and when to move. We work alongside legal and tax partners who do exactly this, and we would be glad to introduce them.
Tax rules change, and they differ from one country to the next. What does not change is why people choose Marbella: the climate, the connectivity, the depth of international demand and a limited supply of prime property.
1. What is the difference between Italy’s and Spain’s tax systems?
Both countries tax residents on their worldwide income at progressive rates, with top rates in the mid-40s per cent once regional charges are included. The differences lie in what each offers newcomers and how each treats wealth. Italy’s flat tax allows new residents to pay a single annual levy, now €300,000 a year for new arrivals, on their overseas income and assets for up to 15 years. Spain has no equivalent. Its special regime for new arrivals (the Beckham Law) applies a 24 per cent rate to Spanish employment income up to €600,000 for six years, and is tied to employment. On wealth, Spain has a wealth tax and a national tax on large fortunes, the Solidarity Tax, which applies to net assets above €3 million. Italy has no general wealth tax, though it charges 0.76 per cent a year on foreign property and 0.2 per cent on foreign financial assets, and flat-tax residents are exempt from both. The right answer depends on your own income, assets and plans, so please take advice before comparing.
2. What is the difference in buying taxes in Italy and Spain?
Italy charges registration tax on resale homes bought from private sellers: around 2 per cent for a main home and 9 per cent for a second home, calculated on the cadastral value, which is often well below the price paid. On new homes bought from a developer, VAT is 4 per cent for a main home and 10 per cent for a second home, and 22 per cent on the highest categories of property. In Spain, resale homes carry a regional transfer tax, 7 per cent in Andalucía, calculated on the higher of the price paid or the reference value. New homes carry 10 per cent VAT plus stamp duty, which is set regionally. In both countries, notary, registry and legal fees come on top. As a guide, total costs are broadly similar at around 10 per cent of the price or more, and in Andalucía we advise budgeting 10 to 13 per cent.
3. Is Italy’s exit tax confirmed?
No. It is a proposal in the draft budget submitted to parliament at the weekend, and is at an early stage of the legislative process. As reported by the Financial Times, it would apply a 26 per cent tax on paper profits to people with assets of €800,000 or more who leave Italy, having been Italian tax residents for six of the previous ten years. Advisers have said many details are unclear, including how it would relate to the flat tax, and amendments are possible as parliament scrutinises the draft.
4. Would the exit tax affect me if I buy a home in Marbella?
Not if you keep your tax residence in Italy. The proposal concerns leaving Italy and changing tax residence, so buying a second home in Marbella is not caught by it. It becomes relevant if you plan to move permanently to Spain, in which case the order and timing of your move matter. Anyone who looked to Italy for its tax regime is also right to look again at their options, although Spain’s rules are different and should not be compared on assumption.
5. Why should I speak to a tax adviser before deciding?
Because the right answer differs from one family to the next, and because it depends on two countries’ rules at once. A good adviser will look at your residency, income, assets and succession plans in both countries, and help you decide whether, where and when to move. Tax rules are also changing, as Italy’s proposals show. We work alongside legal and tax partners who do exactly this, and we would be glad to introduce them.
For a confidential conversation about buying or selling in Marbella, contact Kore Estates Private Office on +34 851 817 060, email info@koreestates.com or visit koreestates.com