The exit tax introduced by the budget will discourage investment without generating revenue. Stop

In Italy, it has gone somewhat under the radar, but abroad it has been widely discussed – starting with the Financial Times – and, it must be said, not in the most favourable terms. Article 17 of the 2027 Budget Bill introduces, without any prior debate on the matter, a genuine novelty for our country: an exit tax. In essence, it provides for taxation on unrealised capital gains on shareholdings, securities and other financial instruments for individuals, unincorporated partnerships and non-commercial entities (such as trusts) which, having been resident in Italy for at least six of the previous ten tax years, transfer their tax residence abroad from 1 January 2027.

A payment deferral mechanism is provided for, which is more favourable for transfers to European Union member states and states with adequate information exchange agreements; this is clearly designed to try to prevent any infringement of the Union’s fundamental freedoms. Even in these cases, however, the deferral (allowing you to pay later than would normally be the case, whilst benefiting from better terms) would require the immediate payment of a 50 per cent deposit and the provision of a guarantee: a point on which there will inevitably be many practical difficulties should the legislation actually be approved.

The proposed exit tax would apply to those holding assets with a total value of at least 800,000 euros: a threshold which, with a touch of populism or perhaps optimism, some press agencies have associated with the ‘super-rich’. Last but not least, according to the technical report, the expected revenue is €3.37 million in 2027 and €6.74 million annually from 2028 to 2031, before returning to €3.37 million from 2032 onwards, net of refunds. This is not a typo: millions, not billions.

We are certain that many will be writing about this in the coming days, highlighting the practical and systemic issues with this legislation, particularly in light of the experience gained in countries where an exit tax on individuals is already in force and where the issue has never ceased to give rise to litigation, including before the Court of Justice of the European Union. It is standard practice for amendments to be made during parliamentary proceedings, and even the complete removal of a provision cannot be ruled out, as happened – albeit only retrospectively – with the proposed change to the taxation of dividends for holding companies. We had discussed this previously.

Let us move away from technical issues and reflect on the kind of consequences such a regulation entails. The presence or absence of an exit tax is a recurring topic when professionals in the ‘tax and legal’ sector assess a country. Changes introduced in this way, without debate and without consultation with stakeholders, are clearly a legislative strategy, but they may come across as an unfriendly approach towards investors and taxpayers, whether current or potential. It is not difficult to imagine that this provision will act as a brake on investment and on the relocation to Italy of individuals and organisations, as it sends a message of instability, even if this is partially mitigated for those who have moved to our country under the so-called ‘forfait’ scheme: the provision – although this point needs to be clarified further – appears to exclude them for a number of reasons, including, to put it simply, the reference to ‘ordinarily applicable provisions’.

In short, by targeting a small number of people – with revenue amounting to just a few million – there is a risk of discouraging the many who were considering joining, and who are worth far more than the technical report estimates it will generate. Furthermore, it sends a strong message of instability regarding the Italian system in general and creates the impression in some people’s minds – which, in the author’s view, is unfounded – that the government is preparing for a ‘genuine wealth tax’. A good summary might be: much ado about nothing.