Tax Residence in Italy for Foreigners and the Flat Tax Regime

In recent years, Italy has introduced and progressively reformed a special tax regime aimed at attracting high-net-worth individuals and international investors.

This regime, commonly referred to as the Flat Tax, allows foreign individuals to pay a fixed substitute tax on income generated abroad, as an alternative to the progressive Italian personal income tax (IRPEF).

The preferential regime set forth under Article 24-bis of the Italian Consolidated Income Tax Act (TUIR) is reserved for individuals who transfer their tax residence to Italy and who have not been tax resident in Italy for at least nine out of the ten tax periods preceding the transfer.

Main Features – Tax Advantages

The regime offers the following key advantages:

• Tax simplification through the application of a fixed substitute tax on foreign-source income, regardless of the amount.
• Exclusion of foreign income from the ordinary IRPEF taxation system.
• Exemption from foreign asset reporting obligations (Section RW of the tax return) and, in many cases, from wealth taxes such as IVIE and IVAFE on foreign assets.
• The possibility to extend the regime to qualifying family members.

Additional Tax Benefits

In addition to the simplified taxation of foreign income, the regime provides further benefits, including:

• Potential exemption from inheritance and gift taxes on foreign assets.
• Increased tax certainty through the predetermination of the overall tax burden.
• Significant attractiveness for international wealth and succession planning purposes.

Requirements for Tax Residence in Italy

Pursuant to Article 2 of the TUIR, an individual is considered tax resident in Italy if at least one of the following alternative conditions is met:

• Physical presence in Italy for the greater part of the tax year (more than 183 days).
• Registration with the Italian Resident Population Register (Anagrafe).
• Domicile in Italy, understood as the centre of personal, family and economic interests.

Particular attention should be paid to the criterion relating to the centre of vital interests located in Italy.

Amounts and Duration

For individuals transferring their tax residence to Italy as from 1 January 2026, the substitute tax amounts to:

• EUR 300,000 per year for the main taxpayer.
• EUR 50,000 per year for each family member included in the regime.

The regime has a maximum duration of fifteen years and is optional and revocable.

Scope of Application

The substitute tax applies to all income generated abroad.
Conversely, income sourced in Italy remains subject to ordinary taxation.

Obligations

The option for the regime must be exercised in the tax year in which the tax residence is transferred, either through the filing of the annual tax return or, in more complex cases, through the submission of an advance ruling request (“interpello”) to the Italian Revenue Agency, in order to obtain certainty regarding its applicability.

Maintaining tax residence in Italy is a necessary condition to benefit from the regime. The loss of Italian tax residence results in the automatic forfeiture of the regime.

The Role of the Lawyer

The role of an international lawyer is central in the planning and implementation phase of the transfer of tax residence. Legal assistance is essential in order to:

• Analyze the client’s prior tax position and verify the non-residence requirement.
• Assess tax residence risk profiles, including potential challenges by the Italian tax authorities.
• Coordinate tax aspects with civil, corporate and succession matters.
• Arrange and submit advance ruling requests to the Italian Revenue Agency.
• Assist the client with the relations with foreign tax authorities and in the application of double taxation treaties.
• Support international wealth and succession planning.

The involvement of a lawyer ensures legal certainty, preventive protection and the correct structuring of the transfer of tax residence, avoiding mistakes which could compromise access to the regime or  could result in penalties.

Conclusions

The Flat Tax regime for new foreign residents represents a significant opportunity and a highly attractive instrument for individuals with substantial foreign income and international assets. However, the decision to apply this regime requires a highly specialized approach and a deepened preliminary assessment.

A tailored analysis, supported by professionals experienced in international law and tax matters, is essential to ensure a compliant, safe and compliant application of the regime, to minimize risks of disputes and maximize the benefits offered by the applicable legislation.