Individuals who transfer their tax residence to Italy from 1 January 2026 may opt for a fixed substitute tax of €300,000 per year on foreign-source income, with an optional extension to qualifying family members at €50,000 per year per person. This alternative can replace Italy’s ordinary progressive personal income-tax regime, whose top marginal rate is 43%, plus regional and municipal surtaxes. Govoni Law has long assisted international property owners and families in the Florence area and Costa Smeralda; today, this regime is one of the most relevant wealth-planning tools for those choosing Italy as their new home base. The 2026 increase is linked to the amendments introduced by Italy’s 2026 Budget Law.
What Article 24-bis TUIR Provides Today
Introduced in 2017 and subsequently amended, the regime allows an individual who transfers tax residence to Italy to subject foreign-source income to a fixed substitute tax, regardless of its actual amount. Whether annual foreign income amounts to €1 million or €50 million, the substitute tax remains the same.
Italy’s 2026 Budget Law—Law No. 199 of 30 December 2025—increased the annual amount due by the principal taxpayer from €200,000 to €300,000, and the amount due for each family member included in the election from €25,000 to €50,000.
The increase is not retroactive. Individuals who transferred their tax residence before the new rules entered into force continue to pay the amount applicable when they exercised the election, for the remaining duration of the regime, which may last for up to fifteen years and cannot be renewed.
Access to the regime requires satisfaction of a specific objective condition: the individual must not have been tax resident in Italy for at least nine of the ten tax periods preceding the transfer. There is no minimum-income threshold, no requirement to carry out a particular professional activity, and no nationality restriction. The regime is available to any individual who meets the temporal condition and genuinely transfers tax residence to Italy, rather than making a merely formal relocation.
The election is made through the appropriate section of the Italian personal income-tax return for the first tax period of Italian residence, subject to the applicable procedural requirements. A prior tax ruling is not mandatory, but it may be advisable where eligibility, the source of income, or the ownership structure presents interpretative uncertainty. The substitute tax is paid in a single instalment by the applicable deadline.
Why It Can Be Advantageous—and for Whom
The advantage of the regime does not lie in a reduced percentage rate. It lies in replacing the ordinary worldwide progressive taxation of qualifying foreign-source income with a fixed annual amount that does not depend on the income actually earned.
For an international estate generating dividends, investment income, foreign real-estate income, or trust-related income across several jurisdictions, the €300,000 tax can become attractive once the Italian tax otherwise due under the ordinary regime would exceed that amount. The actual economic outcome must, however, be assessed on the specific facts of each case.
The optional extension to family members can also be significant. It may allow the regime to cover a wider family group, including the spouse, children and other family members within the statutory framework, provided that each person meets the relevant legal conditions and transfers tax residence to Italy where required.
The regime should always be assessed through a genuine break-even analysis. The fixed annual cost must be compared with the tax that would otherwise apply income by income, taking into account:
- The composition and location of foreign income and assets
- Applicable double-tax treaties
- Foreign withholding taxes and local taxation
- The expected duration of residence in Italy
- Family composition and succession objectives
- The maximum fifteen-year, non-renewable duration of the regime
This is not a simple arithmetic exercise. It requires international tax analysis and should be completed before the transfer of tax residence, not afterwards.
Italian-Source Income Is Outside the Flat Tax
A frequently underestimated point concerns the objective scope of the regime. The €300,000 substitute tax applies only to foreign-source income, determined under Italian tax-law sourcing rules.
Income arising in Italy remains subject to ordinary Italian taxation. This includes, for example, income generated by real estate located in Italy. A person purchasing property in Costa Smeralda with the intention of producing rental income must therefore carefully consider the tax treatment of that Italian income and the appropriate ownership and management structure on a case-by-case basis.
For internationally mobile families, the distinction between Italian-source and foreign-source income is fundamental. The location of a bank account, holding vehicle or payer does not by itself settle the tax characterization; the relevant Italian territorial-connection rules must be applied carefully.
Succession and Gift Tax on Foreign Assets
A further structural benefit, often decisive in intergenerational wealth planning, is the Italian inheritance and gift-tax treatment of foreign assets. During the validity of the election, Italian inheritance and gift tax is generally due only in respect of assets and rights existing in Italy at the time of the succession or gift.
This means that foreign shares, overseas real estate and international financial assets may fall outside Italian inheritance and gift tax while the regime remains effective. That does not eliminate any tax exposure imposed by the jurisdiction in which the asset is located or otherwise connected; foreign succession, gift and estate-tax rules must still be assessed locally.
For families whose wealth is distributed across several jurisdictions, this feature can create an important planning opportunity—provided the succession plan, ownership structures, residence position and applicable foreign laws are considered together.
Why Would the Country of Origin Accept This?
This is a legitimate and recurring question. The short answer is that the country of origin does not need to “accept” Italy’s regime.
Each country’s taxing power is based on internationally recognised connecting factors. Most commonly, these are tax residence and source. A transfer of tax residence is not a negotiated agreement between states; it is an individual decision whose tax consequences are governed by domestic law, tax treaties and, where applicable, supranational rules.
The principal framework is the contrast between:
- Worldwide taxation, generally applied by the country of tax residence
- Source taxation, applied by the country in which the income is generated or to which it is legally connected
When an individual leaves a country and becomes tax resident in Italy, the former country will generally lose the right to tax future foreign income merely because of the previous residence relationship. It will nevertheless often retain taxing rights over income that remains connected to its territory, such as income from locally situated real estate, work performed there, business activities carried on through a permanent establishment, or certain capital gains and participations.
Double-tax treaties—typically based on the OECD Model Convention—allocate or coordinate those taxing rights. Depending on the category of income, they may grant exclusive taxing rights to one state or concurrent taxing rights, often mitigated through exemption or foreign tax-credit mechanisms.
Many jurisdictions also operate some form of exit-tax regime. Such taxes may capture unrealised gains accrued before the taxpayer’s departure, especially in relation to shares, business interests or other specified assets. The Italian flat-tax election does not remove or neutralise any exit tax imposed by the country being left. A relocation plan should therefore always include a pre-departure review conducted with qualified advisers in the jurisdiction of origin.
International Tax Mobility Is Reciprocal
Italy’s Article 24-bis regime exists within a wider international environment in which states compete for economically mobile individuals, investment and entrepreneurial capital. Many jurisdictions offer preferential or transitional tax regimes designed to attract investors, executives, entrepreneurs or internationally mobile families.
This does not mean that tax outcomes are interchangeable. Each jurisdiction has its own residence tests, source rules, exit-tax provisions, treaty network, reporting obligations and anti-avoidance legislation. A move to Italy should therefore be planned as an integrated cross-border project, not as a stand-alone Italian tax election.
Recent reforms to the United Kingdom’s former non-domiciled tax framework have also increased interest among internationally mobile families in alternative jurisdictions, including Italy. The appropriate solution depends on the individual’s residence history, asset location, business interests, family arrangements and anticipated time horizon.
Frequently Asked Questions
Can the regime apply to shareholders and foreign operating companies?
Potentially, yes. However, the treatment of dividends, gains, business income, qualified shareholdings and income connected with foreign companies requires a detailed review. Permanent establishments, management-and-control issues, hybrid arrangements and the substance of the foreign structure can affect both the classification and sourcing of income.
Does the Italian flat-tax regime protect against exit tax in the country of origin?
No. An exit tax, where applicable, is an autonomous tax governed by the law of the country being left. It is not cancelled or reduced merely because the individual elects Italy’s Article 24-bis regime. A serious relocation plan should include an advance review of the departure jurisdiction’s exit-tax rules.
Is a prior ruling from the Italian Revenue Agency necessary?
A prior ruling is not always mandatory. However, a preventive ruling may offer valuable certainty where the case involves uncertainty concerning the nine-out-of-ten-year non-residence requirement, the sourcing of income, foreign holding companies, trusts, foundations or complex family-wealth structures. The Italian Revenue Agency has issued guidance on the territorial scope and related implications of the regime.
Why Work With Govoni Law
Assessing the commercial and tax relevance of the regime, verifying eligibility, structuring the family and asset position, and considering a possible ruling request are high-value advisory activities. They require the coordinated analysis of Italian law, international tax issues, family wealth planning and the client’s actual residential and investment objectives.
Govoni Law assists affluent Italian and international clients with:
- Preliminary assessment of eligibility under Article 24-bis TUIR
- Review of residence history and documentary evidence
- Analysis of foreign income, assets and wealth structures
- Family extension of the regime
- Coordination with foreign tax advisers and Italian accountants
- Evaluation and preparation of a possible ruling request
- Property-related planning in Tuscany, Florence, Sardinia and Costa Smeralda
- Cross-border succession and wealth-planning considerations
Clients considering a transfer of tax residence to Italy—or who have already acquired a property in Costa Smeralda and wish to assess the real value of the new-residents regime—may contact Govoni Law for a confidential preliminary assessment of their tax and wealth-planning position.
This page provides general information only and does not constitute legal or tax advice. Any decision concerning tax residence, the Article 24-bis election, foreign assets, trusts, companies, inheritance planning or cross-border taxation requires a tailored review of the specific facts and applicable laws.