Flat tax on foreign income of new residents doubled to €200,000

Article 2 of Law Decree 113/2024, most recently converted into law, redefined the standards of the special tax regime of Article 24-bis of TUIR, providing for the increase from 100,000 to 200,000 euros of the flat tax applicable to billionaires’ foreign income. But the new rule has not retroactive effect so it does not affect taxpayers already subject to the regime.

The New Residents regime was introduced in the Italian tax system in 2017 and applies to people who decide to transfer their residence to Italy, opting to be subject to the flat tax on foreign income, provided that they have not been tax resident in Italy for at least nine tax periods during the ten preceding the effective year of the option. By paying the flat tax, the new residents are exempt from other levies on overseas earnings, notwithstanding the amount of such earnings.

According to data collected by the Ministry of Economy and Finance, in 2022 this preferential regime attracted 957 wealthy new residents to Italy, in addition to the 2,678 already moved in previous years, with a collection of 89,750,000 euros as flat tax for the Italian treasury.

Despite the increase of the flat tax, Italy is likely to remain appealing to high-net-worth individuals (HNWIs), who value the country’s lifestyle, security, and culture as much as its tax advantages. Furthermore, contrary to recent uncertainties in other countries’ tax systems, such as the “res-non-dom” regime in the United Kingdom, Italy is able to offer a clear, stable and competitive tax regime.

Actually, the only change introduced to the scheme is the amount of the flat tax, adjusted also to take account of inflation, while all other rules remained unchanged: the duration is 15 years and the regime can be extended to the tax payer’s family members, if they meet the residency requirements, with an additional tax of 25,000 euro per member; there is no need to declare foreign income and assets, and exemption from inheritance taxes and taxes on foreign investments (estate and financial products) applies.

Moreover, HNWIs already resident in Italy will continue to pay the 100,000 Euro annual levy, being not affected by the increase, as the change will only apply to new residents, who transferred their tax residence to Italy pursuant to Article 43 of the Italian Civil Code after 10 August 2024.

It is important to point out that the flat tax regime covers only foreign income and assets, while Italian income of the New resident HNWIs is subject to the domestic regime, with the application of progressive tax rates.