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Favourable tax regime is drawing wealthy newcomers and changing the city’s dynamic

Walking down the cobbled streets of Milan’s trendy Brera district on the last day of March, one senior banking executive spotted three international removal trucks.

“It was incredible,” he said of an influx of new residents in the city ahead of the end of the UK tax year on April 5. “There was an explosion of arrivals.”

Italy’s welcoming tax regime has drawn throngs of wealthy newcomers to the country’s financial centre, bringing new strains to the city, particularly in a real estate market where demand far outstrips supply and that is now the focus of a sprawling corruption investigation.

But it has also given Milan a buzz some liken to London in the 1990s — with a dolce vita twist.

Milan’s transformation has its roots in a series of 2016 tax breaks under Italy’s then prime minister Matteo Renzi, whose centre-left administration set out to reverse the country’s brain drain and lure wealthy foreigners.

But the shift has gained momentum, particularly in the past 12 months after the UK’s decision to abolish its 226-year-old rules for non-domiciled residents, exposing their overseas assets to a 40 per cent inheritance tax, and their foreign income and gains to the wider British fiscal regime.

At the same time, Italy has been rolling out the red carpet to the world’s wealthy. A new foreign resident — or a returning Italian who has lived abroad for at least nine years — can pay a flat tax of €200,000 a year on any foreign income and assets for up to 15 years, and be fully exempt from inheritance tax on foreign assets during that period. 

“A few years ago the only people that lived in Milan had known each other since they were children, it was very local,” said Lydia Forte, group director of food and beverage at Rocco Forte Hotels. “Now, there are a lot of people moving there who have no connections to Italy.” 

Those who have left London for Milan include Nassef Sawiris, Egypt’s richest man and co-owner of English football club Aston Villa; Richard Gnodde, vice-chair of Goldman Sachs; and Yoël Zaoui, co-founder of advisory boutique Zaoui & Co. Rolly van Rappard, co-founder of private equity group CVC Capital Partners, is weighing a move, while Bernard Arnault’s son Frédéric is moving between Paris and Milan having taken the top job at LVMH-owned Loro Piana.

They are just the tip of the iceberg. The flat tax scheme has attracted several thousand people, while more than 100,000 individuals, mainly Italians, have benefited from a scheme for those arriving from overseas that gives a 50 per cent reduction on taxable Italian income, with most moving to Milan.

“The big market is people who are 45-70 years old,” said Gary Landesberg, co-founder of The Wilde, one of a new crop of London-style members’ clubs that have opened in the city in recent years, adding that “you’re not just talking about billionaires”.

Nadim Nsouli, founder and chief executive of Inspired Education Group, said Dubai and Milan were the top destinations for the roughly 200 pupils out of a total of 4,500 at its UK private schools who have relocated overseas in the past few years. Of new joiners at its 10 schools in Italy, four of which are in Milan, 45 per cent are typically foreign nationals, with the largest cohorts coming from the UK, the US and France. 

While those who have quit London for Milan give various reasons for their moves, many speak of a combination of the “push” factor from the UK and the “pull” factors of Italy, with fiscal sweeteners only part of the equation.

Citing the quality of life in the Italian city as a draw, one private equity executive who has made the switch said he “wouldn’t do this to move to Dubai”, where there is no personal income tax, and that “if Frankfurt had offered the same deal I would not have gone to Frankfurt”.

With the UK recently raising the tax on carried interest — private equity managers’ profits on successful deals — from 28 per cent to an effective 34 per cent by treating it as trading income, Italy’s flat rate of 26 per cent has made it an attractive destination for PE professionals and venture capitalists who are not on the flat tax regime. 

As part of a wider European expansion, alternatives firms including CVC, Preservation Capital and Ares have been opening and expanding offices in Milan in recent years, joined by hedge funds, including Capstone Investment Advisors and Steve Cohen’s Point72 Asset Management. Private capital executives said they saw opportunities to invest in and lend to Italy’s abundance of family-owned mid-market businesses.

This trend has given bulge-bracket banks such as Goldman Sachs added incentive to widen their own footprints in the city to service rich clients. Such moves come as international lenders have been shifting activity from London to Paris, Milan and Frankfurt to continue serving EU clients post-Brexit, after the UK lost so-called passporting rights. 

Some of those who have moved to Milan are part of the peripatetic super-rich for whom the Italian city is one of several places they might spend a few months a year. Others form part of a younger generation who are putting down roots.

“Milan is a great city to live in and has amazing connectivity,” said John Nery, the 41-year-old managing partner at private equity firm Squircle Capital, who moved to Milan five years ago from Qatar. “Portofino is a two-hour drive; you can be having lunch on the terrace of Villa d’Este on Lake Como in 45 minutes; and in three hours you can be in St Moritz, Megève or Verbier.”

The international newcomers have added depth and variety to Milan’s social scene, reflected in a clutch of new venues that cater to them. Before The Wilde opened its doors last year, international members club Casa Cipriani launched in Milan in 2022, while Soho House is developing an outpost in the city. Contemporary art gallery Thaddaeus Ropac is opening a space in the Palazzo Belgioioso this autumn, and Rocco Forte Hotels’ Carlton Milan is due to open in November.

Some Milanese complain that the influx has made their city “less authentic” and “a little bit over the top”. One banker said tensions had arisen at his company because new arrivals from the UK were on London salaries, far higher than their local counterparts, and criticised the new members’ clubs as “not really the Italian way of doing business”.

A second local dismissed the clubs as being full of bankers and private equity executives, and only existing for those who could not get into old-school Milanese gentlemen’s clubs such as the Clubino and the Circolo dell’Unione.

Even those who are enamoured with Milan complain of poor air quality and few parks, and note that the city empties out at weekends and in August. And while Milan is having a moment, Italy is not the most thriving of global economies and cannot offer the same opportunities for ambitious young people as there are in places such as the US or the UAE. 

“It’s still very bureaucratic,” said Nsouli of Inspired Education Group, notably around hiring and labour laws. “The bureaucracy is one thing they need to address if they really want to become a global city.”

Nowhere is the flow of newcomers more keenly felt than in the real estate market, where prices have been pushed up by people accustomed to Kensington, Notting Hill and Mayfair prices. Several suites at the Four Seasons and the Mandarin Oriental hotels in Milan’s historic centre have been occupied by financiers who relocated from London. 

Milan’s property scene has been struggling to satisfy demand for “trophy assets”, said Danilo Orlando, head of residential at estate agency Savills Italy.

Purchase prices for 600 square metre plus penthouses in central locations with pool, gym and concierge start at $8mn-$10mn, according to Savills, while rents in Milan’s prime residential sector have risen more than 14 per cent over five years, against a 7 per cent increase in Rome. However, Milan remains far behind London, with an average price per square foot of €1,520 against €1,920 in the UK capital.

The news is not all positive. Manfredi Catella, who as chief executive of developer Coima helped redevelop the former industrial Porta Nuova district into Milan’s most exclusive neighbourhood, was among six people placed under house arrest in July as part of a sprawling probe into Milan’s rapid real estate expansion. Although all six were released this month following an appeal, they and another 20 people, including mayor Giuseppe Sala, remain under investigation.

Coima is redeveloping historical buildings in the city centre, including turning a block between the Mandarin Oriental and Bvlgari hotels into luxury residences and offices.

Catella said internal checks had been carried out to confirm “the regularity” of the company’s actions and these could be “clearly represented in court”. Sala said in July he was “shocked” and that he “disavowed” the prosecutors’ interpretation of events.

The legal developments are unlikely to stop the influx of newcomers and their need for housing. Marco Cerrato, a partner at law firm Maisto e Associati, said one client had difficulty finding a large house in the city “because Milan is made up of apartments”, so instead bought one an hour’s drive away in Lugano, Switzerland.

But when it comes to the hotels, restaurants and other luxury services that the new arrivals desire, Cerrato believes the city is “fully equipped” because of the fashion and design contingents. Milan, he says, “was already ready”.

France, Italy, Spain and Poland among countries requesting support from project designed to spur defence spending

The EU’s €150bn loans-for-arms programme is set to be spent in full after 19 member states, including France and Poland, requested funding, as Brussels seeks to spur a surge in defence spending.

The project loans cash borrowed against the EU budget to member state governments to jointly spend on critical military purchases such as air and missile defence systems.

It was proposed earlier this year as part of a Europe-wide effort to dramatically increase defence spending in response to Russia’s war against Ukraine and US President Donald Trump’s demand for the continent to spend more on arms.

‘‘We have reached full subscription,” European Commission president Ursula von der Leyen said on Friday. “We are delivering the capabilities that Europe needs most.”

The funds must be spent on joint purchases by EU governments of defence products in areas identified as gaps by the commission, such as air and missile defence products, cyber systems and drones.

The commission will now assess the individual bids for the so-called SAFE project from capitals, and take decisions on how best to divide the €150bn. Initial disbursements could begin this year, officials said.

Italy and Spain are also among the countries that have applied for funding under the instrument.

“There is a lot of work ahead of us, but we are on the right track,” von der Leyen said during a visit to Riga in a press conference with Evika Siliņa, Latvia’s prime minister. “We have European common defence necessities.”

“Many member states have indicated that they will also use it [to purchase arms] to support Ukraine . . . That is a true European success,” she added.

The initiative comes alongside a pledge by European members of Nato to increase their defence spending to 5 per cent of GDP over the next decade — a promise demanded by Trump as the price of continued US engagement in the continent’s security.

It is designed to promote the purchase of EU-manufactured products, with clauses that limit the amount of third-country components, amid concerns among some European capitals about the continent’s heavy reliance on US-made weapons.

The project was proposed by von der Leyen earlier this year alongside another policy that exempts defence spending from the EU’s rules governing the level of deficit spending by its members.

Riga is the first stop on a four-day trip by von der Leyen to seven of the EU’s easternmost states close to Russia.

Transaction to split grocery and sauces could be announced as soon as next week

Kraft Heinz is nearing a plan to break up the company, reversing the 2015 Kraft and Heinz merger.

The split could result in one entity with Kraft products and another with sauces and spreads like Heinz ketchup.

Kraft Heinz KHC 2.18%increase; green up pointing triangle is closing in on a plan to break itself up, according to people familiar with the matter.

The decision would effectively undo much of the work done from the infamous merger of Kraft and Heinz in 2015, a deal orchestrated by Warren Buffett and Brazilian private-equity firm 3G Capital Partners.

A transaction could be announced as soon as early next week, the people said, cautioning the plans and timing could still change at the last minute.

The Wall Street Journal reported in July that Kraft was planning to spin off a large chunk of its grocery business, including many Kraft products, into a new entity that could be valued at as much as $20 billion on its own. That would leave a company housing goods such as sauces and spreads like Heinz’s namesake ketchup and Dijon mustard brand Grey Poupon.

The company is betting that two separate units would be in total worth more than Kraft Heinz’s roughly $33 billion market value. Shares are up since the Journal’s report in July.

Other details around the pending breakup couldn’t be learned.

Kraft has lately been giving priority to its faster-growing offerings like hot sauces, dressings and condiments, which are more in line with consumer preferences today than processed lunch meats and cheeses.

Kraft Heinz said later in July it was still evaluating potential strategic transactions aimed at boosting shareholder value. The company emphasized that there’s no guarantee any changes or deals will materialize.

“Our board is working with urgency on our evaluation of those strategic options,” Chief Executive Carlos Abrams-Rivera said.

The split would come as corporate breakups are coming more regularly in the food and beverage industry.

Kellogg in 2023 split into two companies, a snacks behemoth named Kellanova and a North American cereal business called WK Kellogg. Keurig Dr Pepper is unwinding a 2018 transaction that had united a coffee maker and beverage company under the same roof.

In a hunt for growth, big food and beverage companies are being forced to re-evaluate their portfolios and come up with other ways to excite investors, including through big deals.

For nearly 200 years, the Jews of Judea wouldn’t let Roman occupiers rule in peace.

Who were the most determined insurgents against the ancient Romans? If it were an exam question, good marks might go to the student who answers that it had to be the Germani, who destroyed no fewer than three of Augustus’ legions at the Battle of the Teutoburg Forest in A.D. 9, or the Gauls, who put up a brave resistance until Vercingetorix’s surrender and ceremonial strangulation in 46 B.C.

The Carthaginians put up a stout opposition in three Punic wars between 264 and 146 B.C., and as an Englishman I must mention the British chieftains who gave the Romans so much trouble between Julius Caesar’s invasion of 55 B.C. and Boadicea’s death in A.D. 61.

For Barry Strauss, a senior fellow at the Hoover Institution and the author of numerous books about the ancient world, the correct answer is the Jews. Mr. Strauss’s “Jews vs. Rome” chronicles the two centuries from 63 B.C., when the Roman conquest of Judea began, to A.D. 136, when the Bar Kokhba Revolt was finally crushed. If the Americans, who also revolted against the world’s most powerful empire, had been forced to surrender after the Battle of Bunker Hill in 1775, they would have had to fight on until 1974 to equal the history of revolt and rebellion of the Jews against Rome.

“It is my hope,” Mr. Strauss writes, “that the history of this period, these people and these struggles, will offer context for the clash of civilizations we are witnessing today and forge a deeper understanding of the forces that propel them.” Certainly, his story of vicious massacres and massive reprisals in Judea has powerful resonances in the contemporary Middle East for anyone wanting to look for them.

Rome always considered Judea as its “near abroad” and so sent much larger forces to crush revolts there than to invade Britain or other areas it considered peripheral. Its policy was always to send ever-larger armies to annihilate rebellions in the Middle East, responding to one such revolt with what Mr. Strauss calls “a savagery not seen since the destruction of Carthage two centuries earlier.” Eventually the Jews had to recognize that there was no sane alternative to accepting Roman rule.

The Great Jewish Revolt (or Jewish War) of A.D. 66 to 74, the Diaspora Revolt of A.D. 116 and the Bar Kokhba Revolt of A.D. 132 to 136 were, Mr. Strauss argues persuasively, only the most visible moments of rebellion by a people who always wanted their freedom. Those three great uprisings were interspersed with dozens of smaller less coordinated outbreaks of resistance that he believes testify to the human spirit and its desire for liberty and self-determination.

The book is not starry-eyed about the terror tactics that the Jewish rebels routinely employed against the occupying power, incapable as they were of fighting a conventional war against the Roman legions, which were always overwhelmingly likely to win any pitched battle. Many Jews were what we might call freedom fighters, but some among them simply did not believe that autonomy was worth the sheer pain the Jews would have to undergo to win it. Many others recognized the material benefits that the Roman Empire undoubtedly did bestow (the “what have the Romans ever done for us?” scene in Monty Python’s “Life of Brian” isn’t entirely inaccurate).

Thousands of pro-Roman Jews therefore helped the Romans suppress the Jewish Revolt, with local elites and property-owners often siding with Rome in the hope of a peaceful life. When one reads of “men flogged until their flesh had been torn to ribbons” and the mix of slaughter and enslavement visited upon the inhabitants of Jotapata, who held out for 47 days against Vespasian in A.D. 67, it’s hard not to sympathize with those early quislings. As Mr. Strauss freely admits: “For the Jewish people in particular, these centuries were cataclysmic.”

The record of some Jews plundering others makes it clear that the war cannot be seen through the simplified prism of evil imperialist versus heroic resister but instead bears all the complexities of modern occupations, such as the French response to the German occupation of 1940-44.

Mr. Strauss is excellent at using modern archaeology to extract information from ancient battlefields. In the case of Jotapata—the scene of a bloody Roman siege in northern Israel —excavators have found evidence of the assault ramp the Romans built to storm the city from its northwestern side, including arrowheads, ballista stones, hobnails from boots, arrowheads and several layers of soil and mortar.

The siege of Jotapata highlights a major problem Mr. Strauss deals with head on. By far the most important source for the Great Jewish Revolt is one book: Josephus’ “The Jewish War,” written about 75 A.D. Yet Josephus reports that 40,000 people died at Jotapata, a figure he inflated 20 times from the correct one of around 2,000. How can one write a book based very largely on such an unreliable central narrative?

Mr. Strauss constantly reminds the reader that Josephus is untrustworthy, and especially in “the parts that make Josephus look good.” Fact-checking is hard at a distance of two millennia, which is why the reader has to trust Mr. Strauss’s judgment in examining those moments in which Josephus is “not shy about taking license with the facts.” On occasion, modern archeological work has borne out some of Josephus’ claims, and Mr. Strauss puts into proper context the ancient historian’s personal treachery against the Jewish cause.

“Josephus, the former priest,” Mr. Strauss writes, “never doubted that God is just. . . . No one could serve as a harsher rod of divine justice than the Romans in all their awful brutality. No doubt Josephus hoped that his Jewish readers would learn the lesson never to repeat their mistake of rebelling against the empire to which God Himself had transferred His favor.” In fact they did rebel again, not once but twice.

As well as the nuanced figure of Josephus, Mr. Strauss’s narrative is populated by huge characters such as Pompey the Great, Queen Helena of Adiabene, the emperors Tiberius and Nero, and Herod the Great and his great-granddaughter Queen Berenice. Mr. Strauss is a judicious sifter of the historical and archaeological evidence, but he can also tell a story. “Jews vs. Rome” is packed with tales of assassins, mobs, agents provocateurs, zealots and traitors. As a Jew himself, however, Mr. Strauss never loses sight of the central fact that for his people these were two centuries of tragedy and disaster, intermixed with very occasional moments of short-lived triumph.

The greatest figures in the book are the Jewish rebel leaders John of Giscala, Simon Son of Giora and Simon Bar Kokhba, whom Mr. Strauss believes to be the most determined insurgent against Rome, and about whom he makes sensible assessments on often tantalizingly small amounts of evidence. Without the Jews and their indomitable determination to resist Rome, this book argues powerfully, modern Judaism would look very different—and less heroically noble—than it does today.

Former ICJ head Nawaf Salam is leading first government in decades to go up against militant group

Lebanon’s prime minister has said the international community needs to step up financial support for the fragile country and its army if his government is to succeed in its ambitious plan to disarm Hizbollah.

Nawaf Salam, who took power in January, said funding from western and Arab states was key to stabilising Lebanon after the war between Israel and Hizbollah last year left swaths of the country in ruins.

Lebanon needs at least $14bn to rebuild, according to the World Bank, along with cash for its under-resourced military which, under the terms of the ceasefire agreement with Israel, is due to take over areas of southern Lebanon under Hizbollah control.

“We have done what we needed to do. To go further, we need Arab and international support,” Salam, a former head of the International Court of Justice, told the Financial Times in a wide-ranging interview this week.

“We need support in terms of equipment and finances to the army . . . and clear financial support for reconstruction and recovery. And we need it now. Now is the time for them to step in,” he said.

Western and Arab governments, however, had indicated to Lebanese officials they wanted to see concrete action on Hizbollah before providing financing, according to people familiar with the matter, citing Lebanon’s historic refusal to rein in the militant group.

Nonetheless, the pledge earlier this month to disarm Hizbollah — which over the past four decades has grown into Lebanon’s most potent political and military force — marked the first time since the end of the civil war in 1990 that a government has gone up against the militant group.

But implementing the US-initiated plan — under which Hizbollah is expected to hand over its weapons to the state by the end of the year — hinges on several factors outside the government’s control.

Despite a ceasefire in November, Israel has launched hundreds of air strikes on Lebanon and continued to occupy at least five pockets of Lebanese territory, inflaming tensions across the country.

Hizbollah, though weakened by its war with Israel, has lambasted both the government and Salam for the plan, saying it will not abide by it and threatening civil strife if pushed. And no one expects the army to take on Hizbollah militarily, meaning dialogue is the only recourse, experts say.

Nine months before a parliamentary election expected to be a referendum on Salam’s reformist government, the prime minister’s domestic critics increasingly question whether he has the mettle to deliver enough progress to convince the electorate to give them a second chance.

“We are now planting the seeds of a strong state,” Salam said. “You need to water them, and you need to give them some time to grow.”

The sprightly 71-year-old’s unexpected nomination for the premiership, shortly after the selection of army chief Joseph Aoun as president, reinvigorated hope for many that Lebanon was finally turning a corner after years of crisis.

But his popularity dipped when the government stumbled at its first hurdle over a fight to nominate the head of the central bank in March — which led to criticism that he was temperamentally unsuited for the cage fight of Lebanese politics — and has struggled to recover since.

Salam said his main focus had been restoring the faith of the Lebanese people and the international community in his country. And to do that, “we needed rule of law and reforms, reforms, reforms”.

In its first few months, his government pushed through long-stalled laws restructuring the banking sector — five years after the country’s devastating financial crisis — and strengthening judicial independence.

It has also arrested ex-ministers on corruption charges — almost unheard of in a country where impunity is rife — and resumed the investigation into the 2020 port blast that had been halted due to political interference.

Government allies argue these are important victories given the level of intransigence, political corruption and vested interests that have long worked to obstruct reform.

“To the outside world, these may seem basic,” said justice minister Adel Nassar, who is key to implementing Salam’s vision of the rule of law. “Are they perfect laws? No, but they are what’s possible in Lebanon today.”

Salam has assembled a cabinet of competent technocrats who work despite offices with peeling paint, little-to-no electricity and bare-bones staffing. But he is also, some say, a micromanager who eschews advisers and is unable to make fast enough progress.

“People say I’m stubborn and undiplomatic, but I simply refuse to compromise on my principles,” Salam said, adding that he hoped the people of Lebanon would give his incremental approach a chance.

“People want 24-hour electricity today. They want inflation to stop . . . But I can’t give them that! You can’t build a house without foundations. And right now, we are laying the foundations,” he said.

“We are at the ground floor and we are building up. It won’t be Le Corbusier, but it will work.”

To sceptics, none of this will be enough for the monumental challenge of disarming Hizbollah.

There were indications this week that the plan was already faltering, after a visit by US special envoy Tom Barrack ended without a gesture of good faith by Israel, which Salam said was essential to advance the deal and which was promised by US officials.

“We told Barrack that the Israelis need to take a real step. They need to show us they’re willing to start withdrawing from Lebanese territory, stop their daily incursions, release the prisoners,” Salam said. “Just pick one and put something on the table.”

Instead, Israel said it would take such action only after Hizbollah was disarmed, frustrating Lebanese officials, who privately warned that this setback could embolden Hizbollah to resist disarmament and push them towards domestic stand-off.

Nabih Berri, Lebanon’s Speaker of parliament and ally of Hizbollah, said in an interview with Asharq Al-Awsat newspaper that US officials “gave us the opposite of what they promised us and . . . therefore things have become complicated again”.

Despite this, Salam was determined that his government would see through disarmament, pointing to Palestinian armed groups that had begun handing over their own weapons to the Lebanese army last week as an example.

For all the fanfare, only a handful of weapons were ultimately handed over. Nevertheless, the ever-optimistic Salam was encouraged.

“This is more than symbolic. A taboo has been broken on the issue of weapons in Lebanon,” he said. “You’ll see, more will come soon.”

Chinese carmaker’s revenues also affected by Beijing’s campaign against discounting which has cooled EV price war

China’s electric vehicle champion BYD reported lower than expected earnings for the second quarter, hit by Beijing’s crackdown on aggressive discounting and long-term supplier payment practices. 

The Shenzhen-based company’s net income dropped nearly 30 per cent to Rmb6.4bn ($897mn), missing analysts’ expectations of Rmb10.7bn. The carmaker recorded a 14 per cent annual rise in revenue to Rmb201bn in the three-month period, falling short of consensus forecasts of Rmb220bn. 

BYD promised in June to more than halve payment times to suppliers to 60 days, after Chinese regulators warned a dozen of domestic car manufacturers against aggressive price cuts and mounting unpaid bills. BYD has long been criticised by suppliers for its long payment terms and issuance of promissory notes as an alternative to cash.

The price war in China’s EV market has also cooled off, as the country’s top officials recently launched a counteroffensive against aggressive discounting on the back of surging production, known as neijuan. The average discount offered by 11 major carmakers in China, including BYD and Tesla, narrowed to 6.7 per cent in early August from a peak of 8 per cent in the second half of June, according to Citi analysts.

The auto sector has been among the key targets in Beijing’s campaign against neijuan. The price cuts have been adding to China’s stubborn deflationary pressures, one of China’s key economic problems, and fuelling tensions with the country’s biggest trading partners as companies turn to exports.