Let’s start with the basics: what is Italy’s tax regime for new residents, and why was it introduced?
It is a preferential tax regime introduced in 2017 for individuals who decide to transfer their tax residence to Italy from abroad. Under the regime, foreign-source income is subject to an annual lump-sum substitute tax, which, from 2026, amounts to €300,000 per year. Income generated in Italy, meanwhile, continues to be taxed under the ordinary personal income tax rules. The rationale is relatively straightforward: to make Italy more competitive in attracting individuals with substantial wealth and high incomes who might otherwise choose other jurisdictions. Increases in the flat tax do not apply retroactively, meaning that those who opted into the regime when the annual amount was €100,000 or €200,000 retain that rate.
Who is the regime actually designed for?
The key requirement is that individuals must transfer their tax residence to Italy and must not have been tax-resident in the country for at least nine out of the ten tax years preceding the transfer. There are no minimum wealth or income thresholds, nor is there any obligation to invest in Italy. However, given the annual tax charge of €300,000, the regime is primarily suited to individuals with substantial foreign-source income. What matters is not so much the value of their wealth itself, but the income it generates and the tax burden that would otherwise apply. Where an individual’s previous tax residence is unclear — for example, because they have significant ties to both Italy and another country — it may be prudent to seek an advance ruling from the Italian Revenue Agency (Agenzia delle Entrate). Otherwise, there is a risk that the regime could subsequently be challenged, resulting in additional ordinary tax liabilities, penalties and interest.
One of the main sources of confusion concerns the €300,000 figure. What does it actually cover?
It covers foreign-source income only. This generally includes dividends, interest, capital gains, real estate income and employment or business income generated outside Italy. Income generated in Italy remains subject to ordinary Italian taxation. This is where misunderstandings often arise: the regime is not a flat tax on all of a taxpayer’s income, but only on its foreign-source component.
Must all foreign countries be included in the regime?
No, and this is one of its most interesting features. Taxpayers can use what is known as cherry-picking, excluding one or more foreign countries from the flat-tax regime where this is advantageous. Income generated in the excluded countries then becomes subject to ordinary Italian taxation, taking into account taxes already paid abroad and, in particular, the relevant double taxation treaties. Excluding a jurisdiction may be beneficial when doing so results in a lower overall tax burden on the income concerned. The decision must therefore be based on the specific structure of the taxpayer’s assets and the jurisdictions involved. Once a jurisdiction has been excluded, however, that choice cannot be reversed in subsequent years.
How long does the regime last?
The regime can apply for a maximum of 15 years. Taxpayers may opt out earlier, while failure to pay the substitute tax correctly results in automatic forfeiture. Years already spent under the regime remain valid, so there is no retroactive recalculation. However, once taxpayers have left the regime, they cannot simply leave Italy, return a few years later and start again: the option is essentially available only once.
Can the regime also be extended to family members?
Yes. The main taxpayer can extend the regime to certain family members, but each individual must independently meet the eligibility requirements, including the requirement not to have been tax-resident in Italy for at least nine of the previous ten tax years. The annual substitute tax for each eligible family member is currently €50,000. There is also an interesting feature: if the main taxpayer loses eligibility, the family members covered by the regime lose it as well. If, on the other hand, an individual family member loses the benefit, this does not affect the eligibility of the others.
Beyond the flat tax itself, which factors really matter when assessing a large international estate?
Several factors come into play, and some may be even more significant than the €300,000 annual tax charge. As a general rule, individuals benefiting from the regime are exempt from the tax monitoring obligations for foreign assets (RW form) and from the Italian wealth taxes on foreign financial assets (IVAFE) and foreign real estate (IVIE). Inheritance and gift taxation is another important consideration. While the regime remains in force, Italian inheritance and gift taxes apply only to assets located in Italy. Assets located abroad fall outside the scope of Italian inheritance and gift taxation, although they may remain subject to any taxes applicable in the relevant foreign jurisdiction. For international estates, this can be a significant factor in succession planning and the intergenerational transfer of wealth.
Looking at the broader economic impact, does the benefit to Italy end with the tax revenue generated by the flat tax?
No, and this is arguably the most interesting aspect.
According to Assonime’s Towards Italy study, the number of new residents benefiting from the regime rose from 94 in 2017 to 2,468 in 2025, and could reach approximately 7,000 by 2040. Direct tax revenue is only part of the picture. Relocations also generate wider economic activity through property purchases, renovations, wealth management, legal and tax advisory services, consumer spending and investment. The overall economic impact, including tax revenue and transactions, is estimated at more than €20 billion. In my view, the issue should be assessed in terms of the potential opportunities created by attracting individuals who can do more than spend: they can also create new initiatives in Italy, without placing a burden on public services, as they typically use private schools and healthcare. Ultimately, these individuals are highly mobile. Without a competitive and stable tax regime, they might not choose Italy.
