Tax code changes in jurisdictions across the world including the U.S., Switzerland, Italy, and the U.K. are leading many family offices and UHNW individuals to relocate in an effort to reduce tax burdens.
Milan, for example, has become attractive of late following a succession of regulatory decisions in both the U.K. and Italy that have led to significantly favorable conditions for wealthy in the latter.
Essentially, the country has introduced a flat tax rate of €200,000 ($235,000) a year on any foreign income or assets for up to 15 years for newly arriving foreigners taking up residency or Italians returning after more than nine years away, while also removing inheritance tax burdens during that time. With its developed financial center, school system, and major airport, Milan has positioned itself as a viable option for many families.
According to the Financial Times, many of these migrants arrive from London. Earlier this year, the U.K. scrapped its long-standing rules for so called non-doms that allowed overseas assets to be exempt from inheritance tax.
A CEO at a single family office in London said that the U.K. should not be taking steps to deter wealthy individuals from moving to or staying in the country but should instead be trying to encourage people to relocate to the country and stimulate the economy through entrepreneurship and innovation. He pointed to the “Golden Trump Card” in the U.S. that offers a pathway to citizenship for $5 million, which he said the U.K. should emulate.
“I know people who earn hundreds of millions or billions for whom the non-dom changes have been a big issue, but also people who earn hundreds of thousands,” he said. “They’re perfectly comfortable to pay income tax on their U.K. income and VAT on their U.K. spending, but if they come from a place where there’s no inheritance tax and suddenly they’re in a regime where 40 percent of assets go to the government when they die, it is no surprise that a lot of people have left at all levels of work.”
Already there are tangible results from the wealthy fleeing the country: Luxury homes, for example, are dropping rapidly in value in London, according to real estate agents in the city. U.K. finance minister Rachel Reeves is now considering unwinding the changes.
Another country known for attracting the wealthy, Switzerland, is also undergoing changes. Following in the U.K.’s footsteps, there have been suggestions of amending tax laws to introduce a 50 percent inheritance tax, the first time such a tax would have existed in the country. Suggested by the far-left Young Socialist Party, the proposal has spooked the Swiss super wealthy, though it is not expected to pass.
In the U.S., meanwhile, movement is often driven by tax differences across states. In New York, for example, there was a spike in exits during the Covid pandemic when many moved to Miami, Florida — a state with no income tax. When Zohran Mamdani shockingly edged out Andrew Cuomo for the democratic nomination in June of this year, with a campaign that promised raised taxes for millionaires dwelling in the city, there were threats of more departures.
A partner at a global private equity house, however, said that New York still holds some semblance of superiority even if taxes become more unfavorable, purely because of its central position within the financial world.
“I talked to an Australian family recently, because they set up their new family office here in New York, and they told me that rather than having people in Melbourne, Australia, they preferred to have their talent sitting in New York,” he said, thousands of miles from home. “That way they can be tapping into the universe and meeting more influential people.”
There are options for U.S. citizens outside the 50 states, too.
Robert Reyers, a second-generation member of a family office based out of Puerto Rico, said that the island offers interesting options for U.S. citizens due to its status as a territory.
“My family made the move and set up our family office in Puerto Rico. They have a tax rule called Act 60 which gives 0 percent tax on Puerto Rico-source dividends, interest, and long-term capital gains accrued after you become a bona-fide resident,” he said. “The most important thing for us is that you're still able to keep your U.S. citizenship and passport. For red-blooded Americans like myself it’s hard to put a price on keeping that.”
Still, he noted that there are other tax problems that come with living in Puerto Rico, and that it is no silver bullet.
Reyers and others expect that the tax changes around the world will result in more relocation to the Middle East, with its promise of zero percent income tax, stability, opportunity, and futuristic living standards.
“An advisor recommended the move to Dubai, but it takes a different type of person to do that,” he said. “Some family office friends are making the move to Italy; it will be interesting to see what other countries open their doors for financial refugees in the next couple of years.”
