Is Milan becoming a tax haven?

Yesterday, the Corriere della Sera reported that in 2023 Milan witnessed a record number of new residents from countries considered tax havens, such as Antigua, the Bahamas, Barbados, Panama, and Cyprus. This phenomenon, which has sparked significant debate, is driven by a change in the Italian tax system offering highly advantageous opportunities for high-income individuals: the flat tax regime. For those who relocate their fiscal residency to Italy, all foreign-earned income is subject to a fixed tax. Until recently, this tax was set at €100,000 but has now been increased to €200,000. For individuals with millions in income, this translates to minimal, if not negligible, fiscal obligations. The intention was likely to attract new foreign capital into the country and its financial hub, Milan, to encourage investment and industry. However, this measure has also prompted numerous ultra-wealthy individuals to choose Milan as their new fiscal residency. The advantage is even greater for those purchasing property in Italy, as the flat tax benefit extends from 5 to 10 years for real estate acquisitions. As a result, the city is becoming a prime destination for those seeking not only a tax haven but also an exclusive real estate market, where prices are soaring dramatically.

Mario Breglia, president of the research center Scenari Immobiliari, told the Corriere that Milan is increasingly becoming the ideal city for those seeking to benefit from the flat tax advantages. Not only do new residents enjoy minimal taxation, but their family members also benefit from an additional tax advantage of €25,000. In short, high-level real estate transactions are continuously on the rise, particularly those exceeding €1 million. Recent examples of extraordinary purchases include a townhouse in the Sant’Ambrogio area acquired for €10 million by a British financial-sector couple, a penthouse in Brera sold for €15 million by Milanese noble heirs to a Spanish entrepreneur, and several luxury apartments in Bosco Verticale, with buyers making staggering offers. Unsurprisingly, rental prices follow suit: real estate agent Valeria Lovo, interviewed by the newspaper, confirmed the growing interest in luxury properties, citing the case of a Swiss entrepreneur paying €140,000 annually in rent. At these extraordinary price points, the focus shifts from square footage to intrinsic value and unique features like outdoor spaces, terraces, and panoramic views. The phenomenon of millionaire fiscal migration is impacting not only Milan’s economy but also its social composition. While the arrival of wealthy new residents brings economic benefits, the rising property prices are creating growing inequality, disadvantaging middle- and lower-income residents whose wages do not keep pace with the surging costs.

According to the Private Wealth Migration Report 2024 by Henley & Partners, Italy ranks sixth globally for the number of millionaires choosing to relocate, with Milan confirmed as the top European destination, second only to Portofino. However, the issue of gentrification arises: Milan is increasingly becoming a city for the wealthy, excluding the less affluent. This issue is particularly pronounced in the outskirts, especially in Corvetto, where many feel that green redevelopment projects while transforming the city’s appearance, are making it increasingly unaffordable for vulnerable groups such as the elderly or struggling families who are now homeless. An article in Il Tascabile highlighted the contradictions of this social situation, where neighborhood revitalization often displaces long-standing residents. As noted: “As sociologist Giovanni Semi observed: ‘It’s important to ask who is involved in an urban regeneration project and at what stage: are neighborhood residents actively included in the initial phases, or are they simply asked to choose the bench colors?’ The impression is that most residents are not truly included in these discussions. In neighborhoods adjacent to the Scalo di Porta Romana, residents instead talk about the rising cost of living, increasing difficulty finding stable jobs, and a world that no longer feels the same.” This reflects the tension between the vertical city and horizontal city, as discussed in the paper Milan, what are you afraid of? It encapsulates the unresolved contradiction between urban planning oriented toward businesses and capital versus that which prioritizes communities and people. Milan now finds itself at a crossroads: while it is hailed as a rising economic hub, it risks being threatened by growing inequality stemming from further gentrification of the real estate market and the concentration of wealth in the hands of a privileged few.