Why Italy’s expat tax regime is fomenting social discord in Milan

When Portuguese football star Cristiano Ronaldo moved to Turin in 2018, the amount of tax he paid kept the media busier than his performance on the field.

Italy has one of the world’s most generous tax-break schemes for expats and super-rich individuals. The so-called “footballers’ scheme”, which has attracted private equity executives and oligarchs as well as sports people, levies a €100,000 fixed tax on any foreign income. It is applicable to anyone who has not lived in Italy for the previous nine years. Since 2016 it has attracted around 2,000 multimillionaires to the country, according to official data compiled by tax company Maisto e Associati.

The more accessible expat scheme, which offered a tax-free allowance of up to 70 per cent of a worker’s income (90 per cent in the south of Italy) before it was tweaked this year, also lured back thousands of Italians who had moved abroad years ago looking for better career opportunities. Including myself. 

But like the UK’s non-dom framework, Italy’s “footballers’ scheme” and expat tax break have proved noxious in the court of public opinion.

Since my move to Milan, the tax break’s unfairness has popped up repeatedly in conversations. It is understandably frustrating for Italians in similar roles to know that they are taking home less than those who are returning from abroad.

Economists have argued that the scheme is inequitable. According to official data, the average income of the 19,448 workers who moved back in 2021 was €131,000 — more than four times Italy’s average income.

But many expats say they wouldn’t have made the shift without such generous incentives. One Italian banker who relocated from London post-Brexit tells me she would have never moved with her non-Italian speaking husband had it not been for the tax break.  

“Knowing we would earn almost double what we made in London on the same [gross] salary was the selling point,” she says, as we sip coffee in the Gae Aulenti square.

We’re in the Porta Nuova district, where tower blocks have sprung up at lightning speed over the past decade. These form just one of many urban regeneration projects promoted by mayor Beppe Sala, and led by Qatar-backed developer Coima.

Such projects, alongside the expansion of Milan’s metro line and housing shortages, have driven up the value of property in the city, experts say.

According to real estate group Tecnocasa, in the five years to 2023, average real estate prices in Milan grew by 43 per cent (other Italian cities saw a near 9 per cent surge). Rents, meanwhile, increased by 19 per cent in the two years to March.

Experts believe that expats who have been attracted by the tax incentive have contributed to the soaring prices. According to property agency Knight Frank, increasing numbers of high net worth individuals benefiting from the €100,000 flat tax on foreign income “are purchasing handsome Milanese penthouses to use as primary residences”.

An agent at a local real estate company who asked not to be named says expats on the salary incentive scheme have put pressure on the non-luxury part of the housing market too: “There has been an influx of professionals with greater spending power than locals coming over from abroad looking for real estate in central locations where supply is limited.”

As the inequality grows, so does unrest. Last year, students camped outside universities to protest over rental price increases. Queues at food banks have become normal: local charity Opera San Francesco says it serves free meals to 2,500 people a day, up 40 per cent from last year. According to the labour ministry, about one-third of Milan’s large migrant population are jobless. The risk of robbery in the city is increasing, and some citizens are feeling increasingly unsafe — a sentiment that populist parties have been quick to play on.

Milan may just be experiencing growing pains as it completes its transformation from an austere local financial capital to a global city. But the balancing act is a tricky one: a level playing field, not footballers, should be the priority.

silvia.borrelli@ft.com