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Italy brings in new tax breaks to attract wealthy foreigners

Italy on Wednesday introduced a flat tax for wealthy foreigners in a bid to compete with similar incentives offered in Britain and Spain, which have successfully attracted a slew of rich footballers and entertainers.

Italy brings in new tax breaks to attract wealthy foreigners
Will wealthy foreigners take Italy up on the offer? File photo: Pexels

The new flat rate tax of 100,000 euro ($105,000) a year will apply to all worldwide income for foreigners who declare Italy to be their residency for tax purposes.

The measure, proposed in Italy's 2017 budget, is expected to immediately draw in at least a thousand people, according to local media.

But those who would want to take advantage of the tax rate would have to have resided abroad for nine of the last ten years, and have sufficient income to make the 100,000 euro price tag an attractive deal.

An additional 25,000 euros per person would also be added to the tax rate of those who set up Italian residency for close family members.

READ ALSO: Taxes and Brexit: The worries of Italy's expat entrepreneurs

A person is considered an Italian resident for tax purposes if they are in the country for more than 183 days, or six months.

According to Italian tax authorities, the flat tax would be renewable every year for a maximum of 15 years.

The new tax plan is a an about-face for Italy.

In 2007, the Italian tax office sued countryman Valentino Rossi, a world motorcycling champion, for unpaid taxes, rejecting his excuse that his main residence was in London.

Rossi eventually paid 19 million euros in 2008 to settle his tax bill.

READ ALSO: Italy recovered a record 16 billion from tax evasion in 2016

Italy recovers record €19 billion from tax evasion in 2016

Photo: Fabrice Coffrini/AFP

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MONEY

REVEALED: Which are Italy’s cheapest supermarkets?

As the cost of living crisis hits household budgets in Italy as elsewhere, a new study says switching supermarkets could shave thousands of euros a year off your grocery shopping bill.

REVEALED: Which are Italy's cheapest supermarkets?

As the cost of living keeps rising amid soaring inflation – Italy’s inflation rate hit a 37-year high at the end of last month – many households across Italy, as elsewhere, are finding it increasingly hard to make ends meet.

READ ALSO: What is Italy doing to cut the rising cost of living?

The government’s recent suggestion of lowering or even scrapping IVA (VAT, or sales tax) on basic food products hasn’t materialised. But consumers could still find ways to save on their grocery shopping.

Many shoppers are now switching supermarkets to save money, or considering it.

And doing so could pay off. A new study from Italian consumer group Altroconsumo showed a family of four can save up to 3,350 euros a year by shopping at discount supermarkets such as Aldi and Eurospin.

Altroconsumo, savings on grocery shopping

Maximum possible savings by type of shopping and household size. Graphic courtesy of Altroconsumo.

For context, the study found Italian families with two children spend an average of 8,550 euros a year on groceries. 

While discount supermarkets do allow for considerable savings however they also generally offer lower-quality products which not all consumers will be satisfied with.

Shoppers can also reduce costs by switching to supermarket own-brand items (i.e. items carrying the supermarket logo), available in stores such as Carrefour and Iper-Coop. 

In particular, shopping at Carrefour, which is the most affordable supermarket in Italy when it comes to own-brand goods, can allow a family of four to save as much as 3,250 euros per year (savings can amount to 2000 euros for individual consumers). 

Consumers who do not wish to part ways with branded products (prodotti di marca) can still save on their shopping, though in this case savings are comparatively lower.

Shopping at Esselunga – the most cost-effective Italian supermarket for branded goods – allows for savings up to 350 euros for single individuals and up to 570 euros for families with two children.

Finally, potential savings are considerably reduced for consumers choosing to stick with a spesa mista, meaning that they generally fill up their shopping cart with a combination of branded items, distributor-brand goods and low-cost goods.

Regional differences 

While switching supermarket can mean savings on food bills, exactly how much you’ll save varies greatly by region.

In particular, Altroconsumo’s latest report highlighted once again the stark divide separating the north of the country from the centre and south. 

READ ALSO: From coffee to haircuts: How the cost of living varies around Italy

 Of the 15 cheapest Italian supermarkets, only two are located in the central or southern regions of the boot (Sesto Fiorentino’s Coop-Fi and Spesa 365 in Bari).

More importantly, consumers living in the north and shopping at the cheapest supermarket or hypermarket available in their city can save as much as 18 percent on a branded-goods-only food bill.

In equal circumstances (i.e. buying only branded items at the cheapest local store), consumers living in most central or southern cities can only save between two and three percent. 

Convenience map by Altroconsumo

The “convenience map”, with the cheaper cities shown in green and the more expensive cities shown in red. Graphic courtesy of Altroconsumo.
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