Exit Taxes and Second Passports in 2026: Italy's Draft 26% Exit Tax and Why a Passport Is Not a Tax Plan

2026-11-02

Joseph Boll — CEO & Founder, Frederick Capital

As of November 2026, Italy's draft budget would tax unrealised gains at 26% when wealthy residents leave. Compare exit taxes in France, Spain, Germany, Canada, the UK and US, and why a second passport alone changes none of them.

By Joseph Boll, Founder and CEO, Frederick Capital

As of November 2026, Italy's draft 2027 budget bill (Article 17) would tax the unrealised gains of residents who move their tax residence abroad at 26%, if they hold assets worth at least EUR 800,000 and were Italian tax residents for at least 6 of the previous 10 tax years, for departures effective from 1 January 2027 (AGI, 30 Oct 2026; Il Sole 24 Ore). It is still a draft that Parliament can amend, but it puts Italy alongside France, Spain, Germany, Canada and the United States, all of which already tax at least some gains when a wealthy resident leaves.

The thread that runs through every one of these rules is the same: exit taxes are triggered by where you are tax resident, not by which passport you hold. A second citizenship can be an excellent piece of family contingency planning. On its own, it does not move your tax residence, and it does not switch off an exit tax.

As a boutique consultancy, we at Frederick Capital (frederick-capital.com) see more families asking about tax exit and a second passport in the same conversation than ever before. This guide sets out the verified rules, side by side, so you can separate the two questions properly.

What exactly is Italy proposing in Article 17 of the 2027 budget bill?

As of November 2026, Article 17 of Italy's draft Disegno di legge di bilancio 2027 introduces an exit tax for individuals (and società semplici and non-commercial entities) who transfer their tax residence out of Italy, levied at 26% on gains that have built up but have not been sold (AGI). According to Il Sole 24 Ore, the measure inserts a new Article 307-bis into Italy's income tax code (TUIR) (Il Sole 24 Ore).

The key mechanics reported from the bill and its Relazione tecnica are:

• Who: anyone who was Italian tax resident for at least 6 of the 10 tax periods before the move, and whose move means Italy loses the right to tax the relevant income.
• Threshold: the total value of the relevant assets and rights must be at least EUR 800,000. Il Sole 24 Ore reports that bank deposits are excluded and that the target is shares, holdings and other financial instruments.
• What is taxed: not the whole portfolio, but the difference between market value and tax cost of each asset (the unrealised gain), at the ordinary 26% rate for financial income.
• Government bonds: the taxable base is cut to 48.08%, in line with Italy's favourable treatment of titoli di Stato (an effective rate of about 12.5%).
• When: departures effective from 1 January 2027. Moves completed before then fall outside the draft.
• Payment: within 180 days of the transfer of residence.
• Deferral: for moves to an EU state or a country with tax cooperation agreements, payment can be deferred until the assets are actually sold, by paying a 50% advance and providing a guarantee. The deferral window is 5 tax periods for EU moves and 10 for other cooperating countries. If the assets are not sold in that window, pass by inheritance, or the person returns to Italy, the tax is not due and the excess is refunded.
• Revenue: the Relazione tecnica estimates just EUR 3.37 million in 2027 and EUR 6.74 million a year from 2028 to 2031, which tells you this is as much about signalling as revenue.

Is Italy's exit tax law yet?

No. As of 2 November 2026 it is a draft provision in a budget bill that has been sent to Parliament, and the threshold, scope and rules can change during parliamentary review (Diaj Journal). Some technical details would also be set by a ministerial implementing decree. Anyone planning a move should treat the figures above as the current draft, not final law.

How does Italy's draft compare with exit taxes in France, Spain, Germany, Canada, the UK and the US?

As of November 2026, Italy's draft is closest in design to France's existing exit tax: both use a EUR 800,000 portfolio threshold and a 6-of-10-years residence test (Légifrance, CGI art. 167 bis). Other countries set the bar higher (Spain), lower (Canada, which has no wealth threshold at all), or tax on renunciation of citizenship rather than departure (the United States).

Verified November 2026 exit tax comparison table

Verified 2 November 2026 against the linked sources. US thresholds shown are the IRS's published 2025 figures; check the current Form 8854 instructions for the year you expatriate.

Why does the residence test matter more than the headline rate?

Because it decides whether you are caught at all. Italy and France look back 6 of 10 years, Germany 7 of 12, Spain 10 of 15. A family that has lived in Milan for five years would fall outside Italy's draft test, while one that has lived there for six would not. These are the kinds of dates worth mapping out a year or two before any move, not the month before.

Does a second passport help you avoid an exit tax?

No. As of November 2026, none of the exit tax rules above is switched off by acquiring another citizenship, because Italy, France, Spain, Germany, Canada and the UK all tax by residence, not nationality. Holding a Caribbean, European or any other second passport while still living, working and keeping your home in Milan, Paris or Toronto leaves you tax resident there, and leaves the exit tax exactly where it was.

The United States is the important exception that proves the rule. Because the US taxes its citizens wherever they live, the only way to leave the US tax net is to give up citizenship itself, and that is precisely the moment IRC § 877A can apply. In practice, a family cannot take that step without first holding another nationality, which is why second citizenship and US expatriation planning are so often discussed together. Even then, the second passport is the precondition, not the tax solution. The covered-expatriate tests, the deemed sale and the five-year compliance certification still apply.

What actually changes your tax position?

Three things, and only three, in our experience:

1. Genuinely moving your tax residence under the rules of both the country you leave and the one you join (days present, home, family, centre of economic interests, and any applicable tax treaty).
2. The timing of that move relative to the exit tax look-back periods and the effective dates (for Italy, 1 January 2027 under the current draft).
3. The structure and nature of your assets, since most exit taxes target shares and financial instruments, while property, pensions and some registered plans are often treated differently.

A second passport can make step one far easier, because it gives you the legal right to live somewhere new. It does not do step one for you.

Why do families still pair a tax-residence move with a second passport?

As of November 2026, the main reasons we see are contingency, mobility and family security, not tax. A second citizenship from programmes such as St Kitts & Nevis (US$250,000 Sustainable Island State Contribution, single applicant, per the Citizenship by Investment Unit) or Grenada (US$235,000 National Transformation Fund, per the Investment Migration Agency) can cover a spouse and children, gives an independent travel document, and adds a place to go if circumstances change. That is the "fire insurance" logic.

Where a second citizenship sits in a country with no personal income tax, the benefit only arrives if you genuinely become tax resident there under local rules, and only after you have dealt properly with the exit rules of the country you are leaving. We say this plainly to every client: a passport is not a tax plan. It is one tool inside a plan that also needs a tax adviser in the country you are leaving and the one you are joining.

What should a family leaving Italy in 2027 do now?

• Map your residence history against the 6-of-10-year test.
• List and value your financial assets (the draft counts market value against tax cost, and the EUR 800,000 threshold works like a cliff edge).
• Decide your destination early, because EU or cooperating-state destinations unlock the deferral option in the draft.
• Watch the bill as it passes through Parliament, since the final text may differ.
• Keep the second-passport question separate, and judge it on contingency, family cover and travel, not tax.

To see where second citizenship fits in a wider relocation, our 2026 Fee Schedule sets out current programme costs, and you can book a private, confidential consultation. Frederick Capital (frederick-capital.com) will keep this guide updated as the position changes.

Frequently Asked Questions (FAQ)

1. What is Italy's proposed 26% exit tax?
Article 17 of Italy's draft 2027 budget bill would tax at 26% the unrealised gains on financial assets of people who move their tax residence abroad. It applies only if they held assets worth at least EUR 800,000 and were Italian tax residents for at least 6 of the previous 10 tax years. It would cover departures effective from 1 January 2027 and is still a draft.

2. When would Italy's exit tax have to be paid?
Under the draft, within 180 days of the transfer of residence. People moving to an EU state or a country with tax cooperation agreements could defer payment until they sell the assets by paying a 50% advance and providing a guarantee. If the assets are not sold within 5 tax periods (EU) or 10 (other cooperating states), the tax is not due.

3. Does getting a second passport mean I no longer pay tax in my home country?
No. Italy, France, Spain, Germany, Canada and the UK tax by residence, not by nationality, so a second passport changes nothing unless you genuinely move your tax residence under local rules. Tax advantages in a low- or no-tax country require real tax residency there, not just citizenship.

4. Which countries already have an exit tax similar to Italy's draft?
France is the closest match, with the same EUR 800,000 portfolio threshold and 6-of-10-year residence test under article 167 bis of its tax code. Spain (article 95 bis IRPF, EUR 4 million threshold), Germany (§ 6 AStG) and Canada (departure tax) also tax gains on departure, and the US taxes covered expatriates who renounce citizenship.

5. Does the UK have an exit tax?
The UK has no general exit tax on leaving. However, under the temporary non-residence rules, gains made while abroad can be taxed if you were UK resident in at least 4 of the 7 years before leaving and return within 5 years.

6. Why does US expatriation planning involve a second passport?
Because the US taxes its citizens wherever they live, leaving the US tax net requires renouncing citizenship, and a family needs another nationality before taking that step. Renunciation can trigger the IRC § 877A expatriation tax for covered expatriates, for example those with a net worth of US$2 million or more.

7. Is Italy's exit tax final?
No. As of 2 November 2026 it is part of a budget bill before Parliament, and the threshold, scope and procedure can still be amended. Some technical rules would also be set by a ministerial decree.

References

1. AGI — Manovra, tassa sui super ricchi che lasciano l'Italia (30 Oct 2026)
2. Il Sole 24 Ore — Exit tax: chi paga e quanto
3. Diaj Journal — Exit tax in manovra: chi lascia l'Italia con 800mila euro
4. Légifrance — Code général des impôts, article 167 bis
5. impots.gouv.fr — Je quitte la France, suis-je concerné par l'Exit Tax ?
6. Agencia Tributaria — Régimen especial de ganancias patrimoniales por cambio de residencia
7. BOE — Ley 35/2006 del IRPF
8. Gesetze im Internet — § 6 Außensteuergesetz
9. Canada Revenue Agency — Dispositions of property for emigrants of Canada
10. IRS — Expatriation tax
11. GOV.UK — Tax if you return to the UK
12. HMRC — HS278 Temporary non-residents and Capital Gains Tax (2025)
13. St Kitts & Nevis CIU — Sustainable Island State Contribution
14. Grenada Investment Migration Agency — Becoming a citizen

This article is general information, not legal, tax, or financial advice. Programme rules, statutory fees, and tax laws can change; please confirm the current position and consult qualified legal and tax counsel in each relevant country before acting.