(This article was updated in June 2026 according to the increase in the fixed tax).
In 2016, the Italian government introduced a new tax package to attract high-net-worth individuals looking to relocate to Italy. 2017 was the first tax period affected by the new system, and as early as 2018, we were among the first tax advisers in Italy to submit the initial applications, which were accepted.
The law now includes a €300,000 substitutive flat tax on all foreign income for individuals who become Italian residents. The essential requirement is to become an Italian resident after at least 9 years living outside Italy.
The annual flat-rate tax was €100,000 for those who relocated before 10 August 2024, and then rose to €200,000 for those who relocated before 31 December 2025. From 1 January 2026 onwards, the Italian fixed tax of the res-non-dom regime rose to €300,000. The previous annual amounts continue to apply to those who opted for this tax package in previous years.
The maximum duration of this taxation option is 15 years, and it is revocable at any time by the taxpayer. On the other hand, not paying the yearly flat tax on time results in forfeiture of this substitutive regime, with no possibility of opting back into it.
The yearly flat tax
Under the ordinary Italian rules, Italian tax residents (individuals) are subject to a progressive income tax on their worldwide income (“worldwide taxation principle”). The main income tax “Irpef” has rates ranging from 23% to 43%, but with additional local taxes, the highest rate can reach 45-46%. A complex system of deductions of life expenses reduces the final average tax impact.
In addition, there are:
- a 0.20% tax rate on the value of some financial assets wherever located;
- a 1.06% tax rate on the value of real estate properties owned in Italy and abroad.
Under the flat tax system, the new resident taxpayer can opt for an annual payment of €300,000 instead of the ordinary taxation described above.
The “Cherry Picking” principle
According to this new package, non-domiciled Italian residents can choose which country or countries' income to tax with this substitutive flat tax. All the incomes coming from non-chosen countries (if any) are excluded from the flat tax regime, and, therefore, they are subject to ordinary Italian taxation and will benefit from a tax credit on taxes paid abroad (under ordinary Italian and international treaty regulations and limits).
So, a new resident who opts for the flat tax regime may apply the ordinary tax regime to income arising from one or more specified countries. All income from one excluded country is taxed under the ordinary rules; the taxpayer cannot pick and choose among items of income, only all income from a specific country. This system may allow a new resident to benefit from international tax treaties concerning related incomes.
A Country excluded from the Flat Tax system can not be included again in the new taxation system, and all the related incomes will be ordinarily taxed until the end of the flat taxation option.
All Italian source income (if any) is subject to ordinary Italian progressive taxation and all other Italian tax obligations.
Favourable?
In general, the proper calculation is not a simple exercise:
Foreign sources of income can be remitted to Italy without additional taxation (or withholding tax).
Other advantages and exemptions
According to Italian tax rules, resident taxpayers must fulfil a tax reporting procedure concerning any financial asset, real estate property, car, plane, helicopter, ship, yacht, fine-art items, high-value jewellery, etc. (financial and non-financial assets) directly held abroad, even through a third party, or under trust mandate, etc. This means low taxation (as noted above) and significant leakage of confidential information about those assets.
The option for the new substitutive flat tax grants a total exemption for this kind of asset reporting procedure, with guaranteed complete confidentiality. Italian tax authorities obviously have the power to investigate the taxpayer's position from a worldwide perspective.
This complex, non-confidential reporting procedure applies to assets in countries that are not “cherry-picked” (excluded).
The flat tax for family members
The option for the flat tax is absolutely personal and does not cover taxes otherwise due by other family members. However, the same flat tax regime may be extended to some or all family members, with a reduced €50,000 yearly flat tax for each additional family member. Family is defined very broadly and is not limited to a wife and children. The fixed tax for family members was € 25,000 for relocations until 31 December 2025.
Eligible foreign new residents
The option for the new flat tax system can be exercised only by a person who has not been a resident of Italy for at least 9 of the last 10 calendar years.
This is a robust anti-abuse measure for Italian citizens who moved abroad due to our high ordinary taxation, which could now be brought back.
Ruling procedure
The first option for the substitutive regime could require a ruling procedure with the Italian tax authority. The eligible new resident must declare (and prove) that he meets all the requirements of this new regime, and, above all, that he has not been an Italian tax resident for the last 9 out of 10 years, that he has not had any previous tax residency, that he is not from the excluded Countries (if any), etc.
There will be an exchange of information with the jurisdictions' tax authorities regarding the applicants' residency in the relevant years.
The ruling application does not include any detailed description of the applicant's wealth or income, as it is not relevant to understanding whether he was resident in Italy during the previous 10 years.
The exception to the rule
The flat tax system does not cover capital gains on qualified shareholdings realized by the taxpayer in the first five-year period. Qualified shareholdings represent more than 20% of the voting rights or 25% of a company's capital. The thresholds for listed stock market companies are reduced to 2% and 5% per cent. Ordinary Italian tax applies to these capital gains.
After this five-year holding period, the flat tax also applies to these capital gains, making it even more interesting for long-term tax planning.
Dividends from such shareholdings fall instead within the flat tax regime.
Exemption from gift and inheritance tax
The flat tax system option provides a full exemption from inheritance and gift taxes on all foreign-situs assets held by persons elected to the special regime (in years when the special regime applies).
For further clarification, tailored advice, or to start the application procedure, do not hesitate to contact us; we can assist you and your family.