Leaving Italy: The proposed exit tax

Italy turns its attention to departure planning

After years of measures designed to attract internationally mobile individuals, Italy’s 2027 Budget Law addresses the other side of mobility: the tax consequences of leaving Italy.

The proposal would introduce an exit tax specifically targeting certain unrealised financial gains.

Who may be affected?

The rules would apply to individuals, società semplici and non-commercial partnerships that:

• transfer their tax residence outside Italy;
• have been Italian tax resident for at least six of the ten tax years preceding the transfer (“this includes individuals who benefit or have benefited from the Italian new resident tax regime, depending on the assets invested.”;
• hold relevant financial assets and rights with an aggregate fair market value of at least EUR 800,000; and
• have realised the capital gains during a deferral period identified by the law.

The new rules will apply to taxpayers whose loss of Italian tax residence becomes effective on or after 1 January 2027.

What would be taxed?

The exit tax would apply to unrealised gains accrued on financial assets and rights, including both qualifying and non-qualifying shareholdings, securities and crypto-assets for which Italy loses, as a result of the transfer, the taxing rights on the relevant income.

Tax base: any positive difference between the fair market value of each relevant asset at the end of the tax year preceding the loss of Italian residence and its tax basis. Unrealised losses would not offset unrealised gains.

Rate: the ordinary 26% rate would generally apply. For Italian Government bonds and equivalent securities, the reference rate is 12.5%.

Payment and deferral

General rule: payment is due within 180 days of the date on which the loss of Italian tax residence becomes effective.

Qualifying moves: for transfers to an EU Member State or a non-EU State or territory (e.g. the UK) with which agreements are in force providing for an adequate exchange of information and mutual assistance in the recovery of tax claims, taxpayers may elect to defer payment. If no deferral election is made, the tax becomes due under the general rule above. The election requires an upfront payment equal to 50% of the tax and suitable security for the balance.

Deferral period: Five tax years for EU transfers and ten tax years for qualifying transfers outside the EU.

What happens during the deferral period?

If the assets are disposed of during the deferral period, the tax would be calculated by reference to the lower of:

• the gain accrued at the date of exit; and
• the gain actually realised on disposal.

The upfront payment would be credited against the final liability and may therefore be refunded, in whole or in part.

The tax would cease to be due where, within the relevant deferral period:

• the relevant financial assets and rights are not disposed of;
• they pass upon death; or
• the taxpayer returns to Italian tax residence without having disposed of them.

Simmons’ view - No change to Italy’s inbound tax regimes

The proposal does not amend Italy’s new resident or impatriate regimes.

However, the final legislation should ideally include a clarification safeguarding individuals who leave Italy while still benefiting from a qualifying inbound tax regime, in particular the new resident regime, so that the new exit tax does not undermine the policy objectives pursued through Italy’s inbound incentives.

New residents should, depending on their intention to remain or leave Italy after the expiry of the beneficial scheme, consider tax planning in advance when deciding which financial investments to make and hold.