Italy proposes 26% tax on unrealised gains for those leaving the country

Italy wants 26% for leaving: the exit tax arriving under Meloni

Italy wants to charge people for leaving. The draft 2027 budget presented by Giorgia Meloni's government includes a 26% exit tax on unrealised capital gains for those who move their tax residence out of the country. The measure, set out in Article 17 of the bill sent to the Chamber of Deputies, affects individuals, non-commercial entities and partnerships holding financial assets. Nothing needs to be sold: simply owning the assets and changing country is enough.

The mechanism is called an exit tax and is not an Italian invention. Spain has applied one since 2015 above one million euros, and the Netherlands has considered a similar levy. What is new is the threshold and the harshness of the rate. According to circulating details, the one-million threshold only applies if you own more than 25% of a company; for shares or stakes in any entity the bar rises to four million. Current accounts, cryptocurrencies, property, pension plans and bonds are excluded from the calculation.

What the Italian exit tax actually taxes

The tax does not touch the entire estate, only the increase in value of financial assets. The official idea is to "crystallise" that gain before the taxpayer ceases to be an Italian tax resident. In other words: if someone bought shares for 100,000 euros now worth 300,000, the Italian tax authorities want their 26% on the 200,000 difference even though nothing has been sold. Payment is due at the moment of departure.

The technical defence of the levy is that it prevents someone leaving with an unrealised gain that will never be taxed in Italy. The criticism is that it taxes wealth that is not in the taxpayer's pocket until they sell. Some point out that the Italian rate is harsher than the Spanish one, and that the four-million threshold for shares makes it unworkable in practice: the taxpayer who leaves usually sells before moving or simply does not declare.

Debt in the background: why states look for money where there is none

The context is no accident. Italy has failed to balance its public finances for decades, and neither has France. The prevailing reading in the analyses is that European governments are hunting for new tax bases because the traditional ones no longer yield more. A tax on people leaving is politically cheap: it affects few and shows up in nobody's payslip who stays.

The debate soon shifted to spending. Some argue the problem is not a lack of revenue but the size of the state and the weight of pensions and public sector pay. Others reply that without revenue there is no healthcare or infrastructure. The result is the usual one: a new tax that does not fix the hole and a debate that never touches spending.

Free movement of capital under question

The most repeated argument is that taxing something that has not been sold clashes with the free movement of capital and people that the EU prides itself on guaranteeing. The comparison doing the rounds is the wall: the USSR built one to stop people leaving; now you are charged for exiting. The irony is that the tax applies precisely when the taxpayer has already decided to leave, which reduces the incentive to stay and increases that of planning the departure well in advance.

The open question is whether Brussels will tolerate such a levy. The Spanish precedent of 2015 suggests it will, provided it is carefully designed. But the Italian case is harsher and affects a group with the resources to litigate. The safest prediction is that the final text will be softened during the parliamentary process, though the timeline is uncertain.

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The measure comes at a time when several European governments are searching for ways to prop up budgets that do not add up. If the tax goes through as it stands, Italy will become the European country with the toughest exit tax for high-net-worth individuals. If it is watered down, it will be yet more proof that tax announcements last only as long as the legislative process.