ITALY: An Introduction to Private Wealth Law

The private client sector in Italy is characterised by stable growth and a positive outlook due to mutually reinforcing factors, such as:

• political stability; 
• generational change of family businesses, determining the need for planning business/wealth succession, or liquidity events;
• favourable tax regimes attracting foreign ultra high net worth individuals (UHNWIs) for generational change of family businesses, determining the need for planning business/wealth succession, or liquidity events; and
• enhanced need for estate planning and philanthropic projects as a consequence of an ageing population and substantial wealth without expected heirs in the coming years.

Generational Transition of Family Businesses

The backbone of the Italian economy is formed by entrepreneurs who prospered in the 1970s and 1980s, and who now need to prepare for a generational transfer of wealth. This mass transfer needs professional support to: 

• enable families to express a vision of the future for their business; 
• empower managers to implement that vision; and/or 
• prevent specific family members from interfering with the realisation of such a vision due to an individual’s ambitions/expectations. 

Tax Regimes for New Residents

In recent years, Italian law-making has introduced several tax regimes to attract high net worth individuals. 

• The “new residents” tax regime allows individuals transferring their tax residence to Italy to opt for a “flat tax” covering their foreign income (EUR200,000 for each fiscal year, plus EUR25,000 per additional family member), and inheritance/gift tax charge on the same. This regime is gaining popularity year by year amongst UHNWIs.
• The “tax regime for employees/professionals” allows individuals who transfer their residence to Italy to benefit from a substantially reduced tax base. This is particularly appreciated by celebrities and sports stars. 
• The “tax regime for retired individuals” provides for a flat tax at 7% for nine years to retired foreign individuals who transfer their tax residence to Southern Italy or other specified areas. Each of the above regimes is subject to specific requirements, to be assessed on a case-by-case basis. 

Real Estate

It is a time of great interest for real estate investments in Italy, both as a primary residence for those relocating to benefit from favourable tax regimes and as a secondary residence for UHNWIs. The peculiarities of Italian law (such as the marital property regime and forced heirship rules: see next section) require careful planning, even in the case of straightforward real estate purchases, increasing the need for legal services to guide – or structure where needed – the purchase.

Points for Attention

Civil law consequences of relocation

Italy has forced heirship rules and a matrimonial property regime, plus other country-specific regulations which might have a substantial impact if not properly assessed in advance. Professional planning is highly recommended to ensure that the rules applicable in the country of origin will still be effective after the relocation.

Wealth structures

Although widely used in Italian practice, the Italian tax authorities continue to interpret  trusts with limited understanding. Consequently, even valid and properly structured trusts may be challenged as “interposed” structures. To prevent disputes, it is crucial to adopt a proactive approach by drafting trust deeds and related documents carefully, anticipating potential objections. Given the growing interest towards Italy as a destination or second residence by UHNWIs (bringing along their own wealth structures), a thorough preliminary analysis is highly advisable.