Italy’s new resident tax regime allows individuals who transfer their tax residence to Italy to subject foreign-source income to a fixed lump-sum tax. Originally introduced with a €100,000 annual charge, the regime now applies higher amounts. The sections below explain how it works, what it covers, how it compares with the 7% pensioners’ regime and who can genuinely benefit from it.
What is the new resident regime and who can access it?
Among the measures that make Italy attractive to high-net-worth individuals, the new resident regime occupies a prominent position. It is an optional tax regime available to individuals who transfer their tax residence to Italy, designed primarily to attract persons with substantial foreign-source income, including international entrepreneurs, executives and investors. Unsurprisingly, it is one of the most frequently discussed incentives when considering the relocation of significant wealth.
The mechanism is straightforward. Rather than taxing foreign-source income under the ordinary Italian tax rules, qualifying individuals may elect to pay a fixed annual substitute tax. For those with substantial foreign income, this creates a predictable tax burden that does not increase with the actual amount of income earned abroad.
The principal eligibility requirement is temporal. Applicants must not have been tax resident in Italy for at least nine of the ten tax years preceding the election. This condition is specifically designed for new arrivals and long-term returnees rather than individuals who have only briefly left the country, regardless of nationality. Verifying this requirement is the starting point of any assessment.
There are no restrictions based on the type of foreign income or the country from which it originates. The regime is available both to executives receiving stock options and dividends and to entrepreneurs holding participations and realising capital gains. This breadth makes the regime particularly attractive for individuals whose economic lives are genuinely international. Italian citizens returning after a lengthy period abroad may also qualify if the conditions are met: for example, the Italian manager or entrepreneur who has lived and earned income outside Italy for many years and decides to repatriate, provided they have not been tax resident in Italy for at least nine of the previous ten tax years. For this group the regime can prove especially advantageous, as it often accompanies well-established foreign income.
How the €100,000 flat tax works
The core of the regime is the so-called €100,000 flat tax, a fixed substitute tax payable annually regardless of the amount of foreign-source income earned. It is important, however, to update this figure immediately. The original amount of €100,000 has been increased by the legislature, and higher amounts now apply to new entrants. The historical figure remains widely known but no longer reflects the current rules.
More specifically, the fixed annual charge was increased to €200,000 for individuals transferring their residence from August 2024 onwards and to €300,000 for transfers effective from 2026. The underlying logic remains unchanged: the tax is fixed and does not increase with the level of foreign income, making the regime progressively more advantageous as foreign earnings rise.
For entrepreneurs and executives with foreign-source income measured in millions of euros, the benefit can be substantial. The substitute tax may represent only a fraction of the tax that would otherwise be payable under Italy’s ordinary progressive income tax system. Conversely, for individuals with relatively modest foreign income, the regime may be unattractive because the fixed charge could exceed the ordinary tax liability. The point at which the regime becomes advantageous therefore depends directly on the level of foreign income.
The tax is paid annually in a single instalment using the ordinary procedures applicable to income tax payments. The regime may also be extended to family members, who are subject to a reduced fixed charge for each participating relative. This feature can significantly enhance the attractiveness of the regime for families whose foreign income is spread across several members. It also makes the overall tax burden highly predictable for budgeting purposes.
An example makes the benefit concrete. An entrepreneur relocating to Italy in 2026 with foreign-source income of five million euro a year would pay over two million euro under the ordinary progressive system; by opting for the new resident regime, they instead pay the flat 300,000 euro, whatever the amount of that foreign income. The saving grows with income, because the charge stays fixed: this is why the regime is designed for large international estates.
Included and excluded income: what does the regime really cover?
To evaluate the regime properly, it is essential to understand precisely which income is covered by the substitute tax and which remains subject to ordinary taxation. The fundamental rule is that the fixed tax applies to foreign-source income, while Italian-source income continues to be taxed under the ordinary Italian rules. This distinction is crucial when estimating the actual benefit of the regime.
Accordingly, employment income earned for work performed in Italy, or rental income from Italian real estate, remains subject to ordinary progressive income taxation. By contrast, foreign dividends, interest, investment returns and, more generally, income generated outside Italy fall within the scope of the substitute tax. For this reason, accurately identifying the source of each category of income is essential.
One important exception deserves particular attention. Capital gains arising from the disposal of substantial shareholdings realised during the first five tax years of the regime remain subject to ordinary taxation. This is particularly relevant for entrepreneurs who expect to dispose of significant participations and should be taken into account when planning the timing of future transactions. Deferring a sale until after the fifth year may therefore have significant tax consequences.
The regime also offers two important ancillary benefits. First, participants are exempt from foreign asset reporting obligations and from the related foreign wealth taxes. Second, taxpayers may selectively exclude income from specific jurisdictions from the regime, allowing that income to remain subject to ordinary taxation while preserving access to foreign tax credits. This flexibility can be valuable when optimising an international tax position. Taken together, these features considerably simplify compliance obligations.
Comparing the regime with the 7% pensioners’ regime
The new resident regime is not the only preferential tax regime available to individuals relocating to Italy. Alongside it, Italy offers a separate regime for foreign pensioners, applying a 7% tax rate. Comparing the two is useful because they target very different profiles and objectives, and the most suitable option depends entirely on the individual’s circumstances.
The 7% regime is reserved for recipients of foreign pension income who transfer their residence to certain qualifying municipalities in Southern Italy below specified population thresholds. Unlike the fixed annual charge under the new resident regime, the tax is calculated as a percentage of foreign income and therefore varies according to the amount received.
The economic logic is therefore fundamentally different. The 7% regime is generally advantageous for individuals with relatively modest foreign income, typically pensioners, because a low proportional tax rate remains attractive on limited amounts. The new resident regime, by contrast, rewards individuals with substantial foreign income because the fixed charge becomes increasingly efficient as income rises. Put simply, one regime favours large foreign incomes, while the other is designed for more modest ones.
For international executives, entrepreneurs and investors with diversified and often substantial foreign income streams, the new resident regime is generally the natural point of reference. The 7% regime remains primarily a solution for foreign pensioners relocating to Southern Italy. The two regimes cannot be combined, so selecting the most appropriate one requires an assessment of the specific circumstances involved.
Duration and renewal
An essential aspect of evaluating the new resident regime is its duration. The regime is not permanent but applies for a fixed period of fifteen tax years beginning with the first year for which the election is effective. This is a lengthy timeframe that supports medium- and long-term planning, although it remains finite. Fifteen years is generally sufficient to accommodate significant personal and business projects.
During this period, the regime renews automatically from year to year without requiring a new election. Taxpayers are therefore not required to undertake any annual renewal procedure, provided that the fixed annual tax is paid on time. Timely payment is a fundamental condition for maintaining access to the regime.
The regime may terminate in three ways. First, it expires automatically after fifteen years. Second, the taxpayer may voluntarily revoke the election at any time. Third, the regime may lapse because of non-payment or partial payment of the annual substitute tax. It is important to note that once revoked or forfeited, the regime cannot be elected again. Understanding these termination events helps prevent unintended loss of the benefit.
Once the fifteen-year period ends, or if the taxpayer exits the regime earlier, foreign-source income becomes subject to ordinary Italian taxation. For this reason, individuals intending to remain in Italy for the long term should consider from the outset how their position will be managed after the preferential period expires.
How to apply: procedures and timing
Accessing the regime follows a structured process that should be understood in advance. The election is made in the income tax return relating to the tax year in which residence is transferred to Italy, or in the tax return for the following year, with effect from the relevant tax period. No separate advance application is generally required. Understanding this timing is important to avoid missing the opportunity to elect the regime.
Taxpayers may also submit an advance ruling request to the Italian Revenue Agency seeking confirmation that the eligibility requirements are satisfied before making the election. Although this step is optional, it provides an additional level of certainty and is particularly appreciated by individuals planning significant relocations. In more complex situations, requesting such confirmation is often a prudent choice.
The election and any advance ruling request must identify the jurisdictions in which the taxpayer was previously tax resident. This information may be shared with foreign tax authorities under international cooperation arrangements. The annual substitute tax is then paid in a single instalment by the ordinary deadline for income tax payments. Transparency with foreign tax authorities is therefore an integral part of the regime.
For international entrepreneurs and executives, timing is often critical. The date of relocation determines both the applicable annual charge and the first year of eligibility, and must be coordinated carefully with the taxpayer’s position in the country of origin. This is the work we do as a firm, coordinating the Italian side with that of the country of departure: addressing these issues well in advance, with our assistance, is the most effective way to access the regime correctly and maximise its benefits.
