Italy Flat Tax Regime 2026 News

The flat tax regime for new Italian tax residents, governed by Article 24-bis of the Italian Consolidated Income Tax Act (Testo Unico delle Imposte sui Redditi – “TUIR”), is often described as a system allowing wealthy foreign individuals to relocate to Italy by paying only EUR 200,000 in taxes on their worldwide income.

This interpretation is misleading and has generated significant confusion, particularly among US. and UK citizens and individuals holding substantial international wealth.

In reality, the regime neither eliminates foreign taxation nor allows taxpayers to fully “replace” the taxes due in their country of origin. It is a selective regime that derogates from the ordinary Italian tax system, designed for individuals with very high contributory capacity, operating in coordination with double taxation treaties.

It is therefore appropriate to examine in detail how the flat tax regime for new residents actually operates, who it is intended for, and what its practical limitations are.

What Is the Flat Tax Regime for New Residents

The 2026 Budget Law, approved by Parliament on December 30, 2025, introduces a significant reform in the field of international taxation, affecting the tax regime applicable to high-net-worth individuals (HNWI) who transfer their tax residence to Italy.

Among the most impactful measures is the further increase of the substitute tax provided for under Article 24-bis of the TUIR, commonly referred to as the flat tax regime for new residents. This measure forms part of a broader strategy aimed, on the one hand, at continuing to attract high-income individuals and investors and, on the other hand, at aligning the Italian tax system with recent European developments in residence-based taxation.

Article 24-bis of the TUIR, entitled “Option for the Substitute Tax on Foreign-Source Income Earned by Individuals Who Transfer Their Tax Residence to Italy,” establishes an optional substitute tax regime applicable to income produced abroad.

Under this regime, individuals who acquire Italian tax residence may derogate from the ordinary progressive income tax system by opting to pay a predetermined annual lump-sum tax, commonly referred to as a flat tax.

Access to this optional regime is limited to individuals who jointly meet the following requirements.

First, the taxpayer must not have been tax resident in Italy for at least nine out of the ten tax periods preceding the year in which the option becomes effective, pursuant to the residence criteria set out in Article 2, paragraph 2, of the TUIR.

Second, the individual must transfer their tax residence to Italy in accordance with the same statutory criteria, namely by registering with the Italian Resident Population Register (Anagrafe della Popolazione Residente) or by having their domicile or habitual residence in Italy for more than 183 days during the tax year.

Finally, the intention to opt into the regime must be expressly indicated in the annual tax return relating to the tax period in which the transfer of tax residence occurs, through the completion of section NR of the Italian Individual Income Tax Return (Modello Redditi Persone Fisiche).

Provided that these conditions are met, the taxpayer may also request, through a specific filing, the extension of the preferential regime to one or more family members identified under Article 433 of the Italian Civil Code, provided that such family members also transfer their tax residence to Italy.

100k, 200k or 300k? The Evolution of the Flat Tax for New Residents

In its original configuration, the flat tax regime for new residents provided for a substitute tax of EUR 100,000 per year on foreign-source income, as introduced by the 2017 Budget Law.

Subsequently, this amount was increased to EUR 200,000 per year by Decree-Law No. 113/2024, marking a first significant tightening of the regime from a tax burden perspective.

The 2026 Budget Law follows this evolutionary path, confirming the legislator’s intention to further increase the flat tax applicable to new residents. The proposed legislation provides that, for options exercised as of January 1, 2026, the annual substitute tax on foreign-source income will increase from EUR 200,000 to EUR 300,000.

At the same time, the cost of extending the regime to the main taxpayer’s family members will also increase significantly, with the additional substitute tax per family member rising from EUR 25,000 to EUR 50,000 per year.

Certain core features of the regime remain unchanged, including the maximum duration of the option (15 years) and the taxpayer’s ability to selectively exclude specific countries from the scope of the preferential taxation of foreign-source income.

The substitute tax, which replaces personal income tax (IRPEF) and related surtaxes on foreign-source income, must be paid in a single annual installment by June 30 of each year. The inclusion of family members in the regime is subject to the payment of an additional flat tax of EUR 50,000 per year for each family member.

A key element of the reform is the introduction of a safeguard clause (so-called grandfathering), aimed at ensuring legal certainty and continuity for taxpayers who opted into the regime prior to the entry into force of the new rules.

Under this mechanism, the new substitute tax amounts – EUR 300,000 for the main taxpayer and EUR 50,000 for each family member-apply exclusively to individuals who transfer their tax residence to Italy as of January 1, 2026.

Conversely, taxpayers who validly exercised the option before that date continue to benefit from the tax treatment in force at the time of their entry into the regime, applying a substitute tax of EUR 100,000 or EUR 200,000, depending on the year in which they opted in.

Exercise and Perfection of the Option

Article 24-bis, paragraph 3, of the TUIR originally required that the option for the new residents’ regime be exercised only after obtaining a favorable ruling on a specific advance tax ruling request (interpello) filed with the Italian Revenue Agency, aimed at verifying the existence of the statutory requirements.

This approach was later superseded at the administrative level. With Provision No. 47060 of March 8, 2017, the Italian Revenue Agency clarified that the option may be validly exercised through two alternative methods.

On the one hand, the taxpayer may submit an advance tax ruling request, accompanied by the checklist issued by the tax authorities to demonstrate compliance with the requirements for access to the regime, and wait for a favorable response.

Alternatively, the option may be exercised directly through the annual tax return, without the need for a prior ruling. In this case, the regime is deemed validly activated upon filing the tax return for the tax period in which the transfer of tax residence to Italy occurs, or, as a residual option, the tax return for the immediately following tax period.

For operational purposes, the Italian Revenue Agency, through Resolution No. 44/E of 2018, introduced the specific tax payment code NRPP, titled “Substitute tax on IRPEF – New residents – Article 24-bis, paragraph 2, TUIR,” to be used for payment of the substitute tax via Form F24.

Duration of the Regime, Effects, and Grounds for Termination

The optional regime provided for under Article 24-bis of the TUIR applies for a maximum period of fifteen years, starting from the tax period in which the taxpayer acquires Italian tax residence. In the absence of interrupting events, the option is automatically renewed from year to year without the need for further formalities.

The validity of the regime may, however, cease under several circumstances. First, the taxpayer may voluntarily revoke the option at any time; such revocation produces effects not only for the taxpayer but also for any family members included in the regime.

In addition, the law provides for cases of automatic forfeiture, which occur in particular if the substitute tax is not paid within the prescribed deadlines or if the taxpayer transfers their tax residence outside Italy.

In any event, even in the absence of revocation or forfeiture, the effects of the regime automatically cease upon expiration of the fifteenth tax period from the first year of application.

Additional Benefits for New Residents

Taxpayers who opt into the flat tax regime on foreign-source income, as well as any included family members, may benefit from additional tax advantages with respect to assets and investments held abroad.

In particular, the regime provides for an exemption from the foreign asset monitoring obligations set forth in Article 4 of Decree-Law No. 167/1990, resulting in the exclusion from the requirement to complete section RW of the Italian tax return for foreign financial and real estate assets.

The regime also grants an exemption from foreign wealth taxes, namely IVIE (tax on real estate located abroad) and IVAFE (tax on foreign financial assets).

Finally, following the amendments introduced by Decree No. 139/2024, individuals benefiting from the regime may also take advantage of an exemption from Italian inheritance and gift tax with respect to assets held abroad, subject to the conditions and limits provided for by applicable law.

The Main Misconception: “You Pay EUR 200,000 on All Worldwide Income”

One of the most widespread interpretative errors is the belief that, by transferring tax residence to Italy, a foreign individual can limit their total tax burden to EUR 200,000, with no further taxation in their country of origin.

This statement is both fiscally and legally incorrect. It should be clarified that the regime under Article 24-bis of the TUIR does not eliminate foreign taxation on income produced outside Italy where such taxation is required under the laws of the source country or under international tax treaties. Moreover, the flat tax applies exclusively to foreign-source income, not to income produced in Italy, which remains subject to ordinary Italian taxation, namely:

progressive personal income tax (IRPEF);
regional and municipal surtaxes;
sector-specific substitute taxes (such as the flat tax on rental income or capital gains);
social security contributions, where applicable.

Coordination with Double Taxation Treaties

Under the double taxation treaties entered into by Italy with numerous countries, including the United States and the United Kingdom, foreign-source income often continues to be taxed in the source country. As a general rule, income produced abroad remains subject to ordinary taxation in the country of origin, and the country of residence, Italy, may also tax the same income but must avoid double taxation through tax credits or equivalent mechanisms.

The flat tax regime intervenes precisely at this level by replacing ordinary Italian taxation on foreign-source income with a lump-sum substitute tax.

Practical Example: US Entrepreneur with a US Operating Company

Consider the case of an American citizen who owns an operating company in the United States and transfers their tax residence to Italy, opting into the new residents’ regime. In the United States, the individual continues to be taxed under US tax law, which for US citizens is based on citizenship rather than residence. In Italy, foreign-source income would ordinarily be subject to progressive IRPEF taxation. By virtue of Article 24-bis of the TUIR, however, the taxpayer does not apply ordinary IRPEF to foreign-source income and pays a flat substitute tax of EUR 200,000, which replaces any Italian taxation exceeding the tax already paid abroad.

If the overall foreign taxation is lower than what would have been applied in Italy, the flat tax effectively covers the difference. If foreign taxation is already higher, the regime does not generate an additional economic benefit, but it does provide certainty and simplification.

Why the Regime Is Designed for High Net Worth Individuals

The new residents’ regime is not an “ordinary” tax planning tool. It is conceived as a selective benefit for individuals with very substantial wealth and complex foreign income structures, for whom Italian progressive income taxation would be significantly higher, managing foreign tax credits would be burdensome and uncertain, and certainty of the overall tax burden represents a strategic value.

In this sense, the flat tax constitutes a targeted derogation from the ordinary tax system and traditional treaty-based mechanisms, without eliminating them altogether.

Limits and Issues Requiring Careful Assessment

The regime does not apply automatically and is not risk-free. Among other aspects, it is necessary to carefully assess the correct determination of tax residence, the classification of income as “foreign-source” for purposes of Article 24-bis, the interaction with the tax rules of the country of origin, particularly for U.S. citizens, and the impact on succession planning, trusts, shareholdings, and corporate structures. Incorrect planning may result in significant tax disputes, both in Italy and abroad.

Flat Tax: A Powerful but Often Misunderstood Tool

The flat tax for new residents therefore does not allow one to “pay only 200,000 euros”.

The Italian flat tax regime undoubtedly represents an interesting tax opportunity for high-net-worth individuals wishing to become Italian tax residents while maintaining substantial foreign income. With a fixed annual tax of EUR 200,000, multiple reporting exemptions, and the possibility to include family members, the regime is structured to simplify compliance and encourage international investment.

However, it remains a complex framework designed for individuals with exceptionally high tax capacity, operating in coordination with foreign tax systems and international treaties.

For foreign citizens and large wealth holders considering a transfer of tax residence to Italy, it is essential to understand that the true benefit of the regime is not the elimination of taxation, but rather the limitation of Italian taxation on foreign-source income and the availability of a predictable and predetermined tax burden.