- Italy will increase the flat tax for new foreign residents from €200,000 to €300,000 annually.
- The new rates take effect starting January 1, 2026, for all newly arriving taxpayers.
- Family member inclusion fees will double to €50,000 under the updated Budget Law 199/2025.
(ITALY) — Italy raised the annual substitute tax for new arrivals who use its “new residents” flat-tax regime, lifting the levy on foreign-source income to €300,000 from €200,000 under the 2026–2028 Budget Law, Law 199/2025, effective January 1, 2026.
Law 199/2025 also doubled the charge to include each qualifying family member in the regime, increasing it to €50,000 from €25,000, while leaving the structure of Article 24-bis in place for people who qualify.
The change applies only to individuals who transfer tax residence to Italy on or after January 1, 2026, preserving the earlier amounts for people who opted in before that date under a grandfathering rule.
The Budget Law update recalibrates a measure Italy has used to compete for globally mobile taxpayers, while keeping the core promise of Article 24-bis: a flat substitute tax on foreign-source income, with Italian-source income generally taxed under ordinary rules.
Under Article 24-bis of the Italian Income Tax Code (TUIR), the regime replaces progressive IRPEF on foreign income with the substitute tax for up to 15 years, a long horizon that Italy has marketed to high-net-worth individuals seeking predictability after moving.
Eligibility hinges on a residency history test that screens out people who recently lived in Italy. Applicants must not have been tax residents in Italy for at least nine of the ten tax years before the regime starts.
Becoming tax resident in Italy then depends on standard connecting factors used in Italian tax practice, including registering in the population registry, maintaining domicile, keeping a habitual abode, or spending more than 183 days a year in the country, or 184 in leap years.
The lookback requirement and the way Italy determines tax residence matter because the higher substitute tax now applies based on when a person transfers tax residence, not on when they first consider the move or begin planning it.
For newcomers beginning in 2026, the main taxpayer pays €300,000 as a fixed annual substitute tax on all foreign income. People who want to extend the regime to family members pay an additional €50,000 per person per year, upon request.
Payment timing follows standard Italian tax windows. The main substitute tax is paid by June 30, with the option to pay by July 30 with a 0.4% surcharge.
The mechanism to opt in remains tied to the tax filing process, rather than a separate immigration-style application. Individuals typically exercise the option through the tax return in the first or second year of residence.
Italy also keeps an alternative route that can be used before filing, through an optional advance ruling with the Agenzia delle Entrate under the framework referenced as Ruling No. 47060 of March 8, 2017.
Those mechanics — tax-return election or advance ruling — mean the first practical “on-ramp” for many people arriving in 2026 will come when they prepare their first Italian filing, even if their move occurs earlier in the year.
Grandfathering draws the main line between who pays what. People who already opted into Article 24-bis before January 1, 2026 continue under the original terms, while only new transfers of tax residence from that date face the higher flat tax.
That distinction preserves predictability for existing participants, while allowing the government to raise the price for future entrants without reopening settled tax positions for people already in the regime.
Italy’s rationale, as described alongside the change, links the higher amounts to broader European pressure on preferential regimes and to shifts in the competitive market for wealthy movers, including euro-inflation and scrutiny of non-dom setups.
The update also frames the regime’s target audience more narrowly than a mass-relocation tool. The change aims at ultra-high-net-worth individuals, while keeping Italy in contention for global entrepreneurs and others with meaningful offshore income streams.
In Europe, Italy’s flat-tax approach sits alongside other preferential tax programs in countries including Portugal, Spain and Greece, which have all featured in debates over how far governments should go to attract internationally mobile wealth.
Rather than removing its regime, Italy chose to raise its entry price for new residents while maintaining the substitute-tax model that can appeal to taxpayers who want a single annual amount on foreign-source income.
Fiscal advisors have pointed to the same feature as the regime’s continuing draw even after the increase, because the substitute tax can still compare favorably with ordinary worldwide taxation for some people, and can also play a role in inheritance planning.
Alongside Article 24-bis, Italy continues to offer other tax incentives aimed at different profiles, and the Budget Law change does not alter those separate regimes.
One option is the Impatriati regime, which aims to incentivize work relocation by offering preferential treatment for qualifying workers and expats who move to Italy under its rules.
Another is an incentive targeted at retirees who settle in specified southern localities, structured around preferential treatment for foreign pension or foreign income under conditions.
Italy also maintains a professors and researchers incentive designed to attract academic talent to Italian institutions, again operating under its own eligibility rules and time limits.
Those incentives differ materially in who can use them and what income they cover, and the existence of multiple tracks can shape how globally mobile individuals consider Italy, depending on whether their primary link to the country is work, retirement, or other activity.
The government has also promoted broader measures that can make Italy more attractive to visitors and residents, including business-related perks mentioned alongside the policy mix such as streamlined VAT refunds for non-EU travelers and energy incentives.
For taxpayers who choose the Article 24-bis route from 2026, the practical process typically begins with the Agenzia delle Entrate and often involves professional advisors, particularly in cross-border cases where the facts supporting tax residence and foreign-income classification can be complex.
Because the election usually runs through the tax return in the first or second year of residence, many new arrivals will first confront the higher €300,000 amount during the 2026 filing cycle, where recordkeeping and consistency between immigration or residence facts and tax positions can determine whether the flat tax applies as intended.
