Flat Tax For New Residents In Italy, Present And Future

Discover the preferential tax regime under Article 24 bis of the TUIR for new residents in Italy: requirements, latest amendments (Decree Law 113/2024) and implications for international clients and returning Italian citizens.

The optional regime for new residents in Italy, commonly known as the Flat Tax for High Net Worth Inpiduals, provides for an annual substitutive tax on foreign source income.

It applies to inpiduals who meet specific asset and residence requirements.

The evolution of the Flat Tax for new residents

The tax benefit known as the Flat Tax was introduced by the 2017 Budget Law to attract inpiduals with high earning capacity and international wealth to Italy.

The reference rule is Article 24 bis of the TUIR (Consolidated Income Tax Act, Presidential Decree 917/1986), which allows taxpayers who transfer their tax residence to Italy and have not been resident for 9 of the previous 10 tax years to opt into the regime.

In practice: if you come from abroad, transfer your residence to Italy (Article 2 TUIR) and meet the non residence requirement for the preceding tax years, you can opt for this regime.

Purpose and context of the Flat Tax

The declared aim of the Flat Tax was to attract investments, capital and inpiduals with high spending capacity to Italy, generating positive spillover effects for the luxury real estate market, related services and the local economy.

It is part of the international tax competition among countries targeting high net worth inpiduals.

A high net worth inpidual (HNWI) is typically defined in the financial services industry as someone holding at least one million US dollars in liquid financial assets.

This status grants access to specialised financial services and exclusive investment opportunities not available to the general public.

Flat Tax as of today (end of 2025)

Currently, for inpiduals who transferred their tax residence to Italy after 10 August 2024, the substitutive tax is set at 200,000 euros per year.

Eligible taxpayers: inpiduals (Italian or foreign) who transfer their tax residence to Italy and who have not been resident in Italy for at least 9 of the 10 tax years preceding the start date of the option.

Taxable scope: payment of this fixed sum fulfils all tax obligations relating to income produced from foreign sources (for example pidends, capital gains, foreign real estate income).

Income produced in Italy remains subject to ordinary Italian personal income tax (IRPEF).

Benefits: by paying the fixed annual tax, the taxpayer is exempt from tax obligations relating to all foreign source income (except where opting for ordinary taxation for specific countries), including exemption from inheritance and gift taxes on assets located abroad.

Duration: the regime can last up to 15 consecutive years.

Family members: the regime may be extended to family members by paying a reduced tax, currently 25,000 euros for each family member with their own income.

The possible 2026 Flat Tax

The Draft Budget Law 2026 provides for a further increase in the annual substitutive tax.

The tax for the main taxpayer will most likely rise to 300,000 euros starting from January 2026.

For family members a doubling of the contribution is foreseen, although the exact amount has not yet been confirmed.

In summary, the government is progressively increasing the cost associated with this tax regime, making it less attractive than in the past, while still maintaining it as a beneficial option.

If the 2026 Budget Law were approved as currently drafted, taxpayers already enrolled in the regime and paying 200,000 euros would continue to pay 200,000 euros for the remaining duration of the regime (up to 15 years).

The proposed rule has no retroactive effect.

The increase to 300,000 euros would apply only to new taxpayers transferring their tax residence to Italy from the date the new law enters into force (expected on 1 January 2026).

Those who have already consolidated their status under the previous rules retain the conditions in place at the time they opted into the regime.

Possible changes after parliamentary debate

In recent months political debate on the regime for new residents has intensified in Italy.

The Lega party has put forward proposals to make the access conditions more stringent and to tie the tax benefit to actual investments in Italy.

For example, access to the regime might be conditional upon investments in start ups, research institutions or Italian financial instruments.

However, these are only proposals. It is uncertain whether they will be approved and, if so, whether the final version will match the initial proposals.

Main requirements for the Flat Tax

• Transfer of tax residence to Italy pursuant to Article 2, paragraph 2 of the TUIR.
• Not having been tax resident in Italy for at least 9 of the 10 years preceding the start of the option.
• Election of the option in the tax return relating to the year of transfer or the following year.

Income produced in Italy (for example employment income earned in Italy) is not covered by the substitutive tax. Ordinary IRPEF applies.

Benefits of the Flat Tax

Opting for the Flat Tax entails:

• Payment of a fixed substitutive tax on foreign source income (regardless of the amount) instead of the progressive Italian IRPEF which would otherwise be significantly higher.
• Exemption from obligations such as fiscal monitoring (Form RW) for foreign financial assets and, in many cases, from wealth taxes such as IVIE and IVAFE on foreign assets.
• Extension of the regime to family members of the taxpayer, provided they meet the relevant requirements.

Amount of the substitutive tax and duration

• For those who transferred their residence before 10 August 2024, the amount was 100,000 euros per year.
• With Decree Law 113/2024 (the so called Omnibus Decree), for those who transferred residence after 10 August 2024, the substitutive tax has been set at 200,000 euros per year. This figure is expected to increase to 300,000 euros per year in 2026.
• The contribution for each family member has so far remained at 25,000 euros per year. This amount is also expected to increase in 2026, probably doubling.
• The maximum duration of the option is 15 years, unless revoked or terminated due to failure to pay the tax.

The option is formalised through the tax return and timely payment is an essential requirement.

Late payment cannot be remedied.

Clarifications on the Flat Tax

Those considering the Italian Flat Tax should be aware that:

1. The regime applies only to foreign source income. Income produced in Italy (including employment income, real estate and business income) is taxed under ordinary IRPEF.
2. The option may lapse if the taxpayer fails to pay or pays the substitutive tax late.
3. The taxpayer must effectively transfer their tax residence to Italy and meet the requirement of having been abroad for 9 of the previous 10 tax years.
4. Any assessment of residence may give rise to disputes.
5. Legislative amendments may change the conditions and terms of the regime.
6. Even though the tax is a lump sum, compliance with eligibility requirements must be well documented.

Who the Flat Tax is intended for

The Flat Tax regime can be advantageous for high income foreign nationals or Italian citizens considering returning after more than 9 years abroad.

Specifically, it is designed for:

1. New Residents in Italy. The essential requirement is that the taxpayer moves their tax residence to Italy.
2. High Net Worth Inpiduals (HNWI). The regime is intended for inpiduals with significant assets, since the fixed substitutive tax (currently 200,000 euros, increasing to 300,000 euros from 2026 for new entrants) is economically beneficial only for those with very high foreign income that would otherwise be taxed above this threshold under IRPEF.
3. Previous Non Residence Requirement. It is necessary not to have been tax resident in Italy for at least 9 out of the 10 tax years preceding the start of the flat tax regime. This prevents those with recent ties to the Italian tax system from benefiting.
4. Extension to Family Members. The regime may be extended to the taxpayer's family members. In this case, each member pays a reduced annual substitutive tax (currently 25,000 euros).

High income foreign nationals

For those residing abroad with substantial foreign source income (for example pidends, interest, investment income) and considering relocation to Italy, the regime can be very beneficial.

Regardless of the amount of foreign income, the taxpayer would only pay an annual lump sum of 200,000 euros (up to 300,000 euros from 2026) instead of IRPEF rates which can rise to 43 percent plus regional and municipal surcharges.

Additional benefits include exemption from fiscal monitoring and foreign wealth taxes.

Flat Tax for italians returning from abroad

The regime may also be an opportunity for Italians who have lived abroad for a long time and are considering returning to Italy.

Those who have lived abroad for tax purposes and meet the non residence requirement for 9 of the preceding 10 tax years may opt for the regime and reduce taxation on foreign income.

This can support tax planning for inpiduals with foreign assets or income who wish to move their base back to Italy.

It is important to distinguish this regime from the regime for inbound workers, which applies to highly qualified employees and provides partial exemptions (50 to 60 percent) on Italian source income under specific conditions. The regimes are not cumulative.

It is not automatically guaranteed that a taxpayer can choose between the two regimes for the same tax year.

They are mutually exclusive.

The preferential regime under Article 24 bis TUIR for new residents is currently an important opportunity for inpiduals with foreign source income considering a transfer of tax residence to Italy.

The amendments introduced by Decree Law 113/2024 (raising the substitutive tax to 200,000 euros per year) show that Italy is adjusting the attractiveness of the regime without eliminating it.

Prospects of further tightening (for example towards 300,000 euros annually or investment obligations) require timely planning for those considering relocation to Italy.

The Boccadutri International Law Firm follows legislative developments concerning the Flat Tax and tax benefits.

If you would like to assess whether you meet the requirements, understand which income may benefit from the regime and develop a tailored plan with our legal and tax team, contact us.

We will be pleased to assist you in evaluating the advantages, managing the documentation and supporting you throughout the entire process.

FAQ on the Flat Tax for New Residents in Italy

Who can access the Flat Tax for new residents?

Inpiduals who transfer their tax residence to Italy and have not been resident for at least 9 of the previous 10 tax years.

What is the current amount of the substitutive tax?

For those transferring residence after 10 August 2024, the tax is 200,000 euros per year. For those who transferred earlier, the previous 100,000 euro amount remains.

What will change from 2026?

The Draft Budget Law 2026 increases the tax to 300,000 euros for new entrants and may increase the amount for family members.

Will the rule have retroactive effect?

No. Those who have already opted in continue paying the amount in force at the time of their option.

Does the regime apply to income produced in Italy?

No. Italian source income remains subject to ordinary IRPEF.

Which income is covered by the Flat Tax?

All foreign source income such as pidends, interest, capital gains and foreign real estate income.

What is the maximum duration of the regime?

The maximum duration is 15 years.

Can family members be included?

Yes. Family members may be included by paying a fixed annual tax (currently 25,000 euros, increasing from 2026).

What happens if the tax is paid late?

The option lapses. Late payment cannot be remedied.

Can Italians returning from abroad use the regime?

Yes, if they have lived abroad for at least 9 of the previous 10 tax years. The regime cannot be combined with the inbound workers regime.

Are other future changes expected?

Parliament is discussing stricter criteria, such as mandatory investments in Italy. It is uncertain whether and in what form these proposals will be approved.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.