Luxury Tuscan estate agent Ian Heath is developing a taste for private jets. “It’s not that unusual anymore,” Heath says of hitching a ride on a billionaire’s jet to the Italian Riviera last week to give the wealthy client a tour of some of the most luxurious and expensive homes.
“These guys fly around the world in their jets and helicopters,” says Heath, a senior agent at Italian estate agency Lionard. “It makes sense to use them for viewings. The problem was we still had to drive from Genoa to Portofino.” In one day, they viewed half a dozen luxury villas dotted along the Ligurian coast and castles on the hills surrounding Florence. The cheapest one they saw was on the market for €10m (£8.4m).
The client, a northern European entrepreneur who Heath declined to identity, is part of a growing influx of the global super-rich to Italy exploiting a little-known tax break that allows the world’s millionaires to pay a “flat tax” of just €100,000 no matter how much money they earn.
“There has been a huge spike in interest among the global wealthy since the tax change,” Heath says in his office overlooking a picture postcard perfect view of the Ponte Vecchio in the heart of Florence. “There was an immediate 17% increase when the law changed in 2017 and, now that they [the wealthy and their advisers] are convinced that the tax break is here to stay, we are getting 350 qualified requests a month.
“People love this. You get the same sort of tax savings you get in Jersey [and other tax havens] but you get to live somewhere you actually want to live.”
Most of the wealthy immigrants to Italy come from the US and Britain, but there have been buyers from across Europe, Russia, Japan and China.
“Why not? When you can buy one of these for the same price as a flat in Kensington or Knightsbridge,” he says firing up his laptop to show a villa with a pool hugging the coast near the pretty resort town of Portofino. “Lots of people are fed up in the UK and want to leave London. They want to feel European, they like the culture and the lifestyle. And of course the tax break.”
The Italian government reports that about 350-400 people applied to move their tax domicile to Italy and take advantage of the “substitutive tax” in 2017 and 2018. Fabrizio Pagani, until recently the chief of staff to the Italian minister of finance, has described the applicants as “people from the UK, Switzerland, Russia, from the US, the usual suspects … Some of those people are art collectors. We are talking about very, very rich people.”
Under the rules of the scheme, anyone who has not lived in Italy for nine out of the last 10 years can apply to pay a flat €100,000 annual tax on all income generated outside Italy. The flat tax includes inheritance payments and money brought into Italy from overseas. The regime can be extended to family members for an annual charge of €25,000 per person.
The International Monetary Fund estimates that tax avoidance costs global governments about $650bn (£500bn) a year in lost revenue.
Many of the people exploiting the tax break are choosing to settle in Italy’s most popular holiday destinations rather than depressed areas that desperately need investment. The number of foreign residents in Florence increased by 38.5% between 2012 and 2016 to 60,000 or about 16% of the population.
Recently, Heath’s agency sold a seaside villa in Tuscany’s exclusive Monte Argentario to a Polish investor for €18m. Villa Buonaccordo, a world famous pale yellow house overlooking the multicoloured fishing village of Portofino, was sold to Chinese semiconductor multimillionaire Zhang Liang Johnson for €35m. There have also been sales worth tens of millions of euros in Milan, Lake Como, Rome, Capri and the Amalfi coast – “anywhere wealth accumulates, really”.
A converted monastery complete with pool, vineyard, orchard, vegetable garden and master suite in a converted medieval watchtower is on the market for €45m.
Heath is also excited that he is soon to list a €40m castle near Florence. “In all my time in property, I’ve never seen anything like it. It’s a proper castle, hundreds of years old with original frescos on the walls and wood-panelled vaulted ceilings.” An unnamed British billionaire currently scouting out a move to Italy will be among the first to view it.
A short walk from Heath’s spot overlooking the Arno river, Bill Thomson, the chairman of the Italian branch of high-end British estate agency Knight Frank, describes demand since the law changed as “insane”.
“There are tax schemes like this all over the world. If you go to Jersey, you’ve got a very similar thing, go to the Isle of Man, Switzerland,” he says. “The wealth can find that sort of tax regime at those sort of levels in several places in the world at the moment. But they’re not in Italy and that’s the really cool thing about it.
“Up until now, this thing [tax havens] has been in weirdly artificial environments … where you don’t want to be. People say there’s a trade-off – I hate being on this little island [Jersey] but I’ve got to do it for tax. And suddenly the Italians have said have Florence, have Milan, Rome, Portofino, you name it.”
Thomson says the global super-rich were slow to commit to moving to Italy because of fears that the country’s populist government would row back the tax scheme, but Giuseppe Conte’s administration has confirmed that the tax break will stand for at least 15 years. Earlier this year, the government also introduced a new tax scheme designed to encourage wealthy pensioners to retire to Italy’s under populated southern towns in return for a flat 7% tax on their foreign pension.
“Now that the wealthy, and their advisers, are satisfied that this tax works they are coming here in big numbers,” Thomson says. “We’ve got one family at the moment who are looking at a potential winery. We’ve got people who are looking at buying something in Portofino and [another] in the mountains.”
The influx has even led to a shortage of places at the €22,000-a-year International school of Florence, which Thomson says has a waiting list despite building four extra classrooms.
Last week, he showed a British billionaire around a vast €35m villa built for a member of Florence’s dynastic Medici family. “It’s complete with an indoor swimming pool, ballroom, the whole lot,” he says. “This is 15th century completely restored.”
Villa la Tana, which boasts a veranda with views of the sun setting behind the cathedral, features six main bedrooms, a further three apartments, pool house and separate staff house. “To run that sort of house successfully, you’re going to want to have four or five staff,” Thomson says.
He says potential buyers of the house, which is owned by San Fransisco multimillionaire Michael Naify, are probably thinking about adding the villa to an existing portfolio of properties. “If you’re buying a house that’s that amount of money, it’s not your first home. This is almost certainly going to be one of a collection of multimillion pound houses, four or five.”
Thomson and Heath reject suggestions that the influx of the world’s wealthy to Italy’s prime locations may push up rents for local people struggling to get by in already-expensive places. “I deal with these guys a lot of the time,” Thomson says. “They’re very good for the local community, they invest a lot … I don’t want you to think they’re rich idiots who live in a castle and don’t speak to anyone.”
However, in Florence’s piazzas, which heave with tourists from dawn to dusk, some of the locals are sceptical as to how the global elite are enriching their lives. Valerio Migliorini, 32, a waiter, says he does not think it was fair that some of the rich people exploiting the tax break were “probably paying a much smaller percentage of tax [on their income] than I do”.
“I don’t think it’s a good idea to bring in these rich people who haven’t lived and worked in Italy and allow them to pay little tax. We already have problems with tax evasion, so this isn’t the solution.” he says. “If we invite rich Americans and British people to come here and pay less tax, they will come and not pay taxes in their countries creating more problems there.”
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