What a difference a few weeks can make. When we researched this article in late February, the wealth advisers in Italy, said they had never been so busy. That boon in work was thanks to a 2017 rule change that has tempted a swathe of high net worth families to relocate to the country in the last three years. A few weeks on and with Italy in lockdown, it’s business as usual for the advisors – albeit from a different set-up.
“In light of the current situation, from our perspective, we are certainly witnessing a demand from clients to speed up the set-up of succession planning structures (particularly, wills)”, said Giulia Cipollini, a partner in the private client and tax team at Withers Worldwide. “Given that many clients have found themselves stranded in places other than their tax residence, due to the flight ban put in place by countries (including Italy), it will be paramount to keep track of the days of their physical presence and related ties to one place in order to/not to meet the specific requirements for tax residency in place for the current FY2020”, she added.
There are opportunities though that some will choose to take advantage of: “We believe that the current situation will bring about new opportunities for investments to be carried out by HNWIs targeting Italian businesses and/or properties”, concluded Cipollini.
Back to pre-coronavirus times, the reason for the uptick in work seen throughout 2019 and early 2020 was a 2017 regime allowing for arriving UHNW individuals to pay an annual flat rate of tax set at €100,000, which covers all foreign-sourced income and assets both for income tax and inheritance tax purposes. The regime has proven to be very successful.
Raul-Angelo Papotti, partner and head of tax planning at the law firm Chiomenti, said: “We have seen a lot of work recently for new resident non-doms, which for us means not only advising them on tax structuring and the management of their tax position, but also on the purchase of real estate and investment into new companies or setting up wealth planning structures.”
He added: “A lot of those families are coming to Italy from the UK, as well as France, Singapore, the US, Canada, quite a lot from Russia, also Switzerland, Qatar and Dubai. With the new tax regime, it is possible to get comfort from the Italian tax authorities on the tax treatment applicable to most of the different types of queries that a new resident might have.”
In addition to the new rules for Italian resident non-doms, there are also new special tax regimes for retirees wanting to relocate to the south of Italy and for so-called ‘impatriati’, or inbound expatriates – a regime set up to attract workers into the country.
“The special tax regimes are proving to be attractive for high net worth individuals. The key feature is that they are very simple and the procedure to apply for the regimes is very straightforward”, explained Cipollini.
She added: “Furthermore, it is possible to file for a preliminary ruling for the Italian tax authorities to ensure the applicant’s eligibility for the tax regimes. That can be filed even before relocating to Italy, so that once the applicant moves, he or she has already received official confirmation from the Italian tax authorities and that ruling is binding.”
Most of those relocating to the country are heading to Milan, according to Papotti, particularly where they work in the finance industry. He has also seen a growing number of HNWIs choosing to relocate to Tuscany, Lake Como, Rome and Portofino.
Another rule-change that is having an impact is the introduction of new laws on the taxation of distributions from foreign opaque trusts to Italian tax resident beneficiaries. The new provisions are effective from 1 January 2020 and are already generating a lot of work.
“We have seen great interest from international trust companies, family offices and international families,” said Cipollini, “as this new legislation has an impact for them. We expect to receive an increasing number of requests for assistance, as the new rules also create very interesting wealth planning opportunities for international families with family members located in different jurisdictions, including Italy.”
The Italian wealth management market in general is becoming much more sophisticated. “We are seeing an increasing need for a high level of advice in international wealth planning, which requires a multijurisdictional approach. Clients are more and more interested in wealth and estate planning, which gives them an adequate level of protection and also ensures the transfer of estate to their future generations in a tax efficient way. Families are become more and more international and mobile, relocating from one jurisdiction to another for a lot of different reasons, so an international approach is essential.”
Claudio Grego is the former co-head of the wealth and trust department at Italian law firm Gianni Origoni Grippo Cappelli & Partners and has recently relocated to Israel to establish an office for the firm. Now of counsel, Grego is also a former senior partner and managing director of Italian private bank Banca Esperia. In Tel Aviv, he is advising a growing number of high net worth Jewish families relocating to Israel – in 2018, the billionaire owner of Chelsea football club, Roman Abramovich, moved from London to Israel, and there are many making the move from Italy, Grego said.
He added: “Italy, together with Japan, has long been the country in the world where the most savings are created. With major changes to the financial situation in recent years, the returns on government bonds are now virtually non-existent, so those clients have to think about a new way of managing their financial savings. This trend, combined with globalisation, means Italian clients are now looking much more closely at wealth planning and family governance.”
Vincenza Altieri, partner in the Rome office of Studio Legale Delfino e Associati, the Italian affiliate of Willkie Farr & Gallagher, is currently busy working for Italian families on the transfer of family business leadership and other assets, through voting trusts and other family agreements. “There are more transfers of real estate to trusts, which is more tax appealing now, and we are doing a lot of work on opinions on regulatory topics such as CRS, disclosure rules and the forthcoming register of trusts in Italy.”
According to her, Italian real estate has been part of the attraction for HNWIs relocating to the country, which is a view shared by Papotti. He said: “We are seeing family offices increasingly investing into important Italian real estate and trophy assets, such as castles and artworks, while foreign family offices are investing into land for development, in projects such as boutique hotels.”
He concluded: “Alongside a lot of work for new residents, we are also busy advising Italian domestic clients on the whole range of needs that private clients have, including the drafting of wills, the sale and purchase of real estate, wealth planning, M&A and succession planning. We have been extremely busy for some time with many different types of transactions.”
We’ll be wishing our friends in Italy a quick and safe return to stability and normality.