Italy’s substitute tax regime for high-net-worth individuals has been raised to €300,000 annually for new applicants, marking the second substantial increase since August 2024 and cementing the country’s positioning as a destination for ultra-high-net-worth families prepared to pay a premium for Mediterranean residency and exemption from worldwide taxation.
The latest increase applies only to individuals transferring tax residency to Italy after the new law entered force in 2026. Those who relocated earlier and opted into the regime continue to pay the rate in effect when they arrived: €100,000 for entrants before 10 August 2024, or €200,000 for those who moved between August 2024 and early 2026. The grandfathering principle has been fully respected, with no retroactive application.
Structure and Eligibility
The regime, introduced in 2017 under Budget Law 2017 (Law No. 232/2016), permits qualifying individuals to pay a flat annual substitute tax on all foreign-sourced income, irrespective of amount or type. Italian-source income remains subject to ordinary progressive rates.
Applicants must not have been tax residents of Italy for at least nine of the ten years preceding their application. The regime is available for up to 15 years and may be extended to family members at an additional cost—now €50,000 per person annually, up from €25,000 under the prior rules.
Participants are exempt from Italian wealth tax on foreign assets, inheritance and gift tax on foreign assets, and are not required to disclose foreign investments to Italian authorities, according to Lexology.
Adoption and Revenue
Between 2017 and 2022, 2,730 individuals enrolled in the programme, according to data from the Italian Ministry of Finance. Tax advisers at Maisto e Associati estimated a further 1,200 participants joined in 2023, bringing the total close to 4,000 by year-end.
At an average annual payment of €100,000 to €200,000 per principal applicant, plus family member opt-ins, the programme has generated several hundred million euros in substitute tax revenue. The increases enacted since August 2024 signal a deliberate recalibration: Italy is narrowing eligibility to those with foreign income well above €1 million per year, for whom a €300,000 annual charge remains materially lower than standard taxation on worldwide income.
Comparison to Competing Regimes
The rate now exceeds Switzerland’s lump-sum taxation arrangements in most cantons, which are negotiated individually but typically range between 150,000 and 400,000 Swiss francs depending on canton and lifestyle expenditure. Switzerland’s regime, however, is not a true substitute tax on all foreign income; it is calculated as a multiple of annual living costs and requires ongoing negotiation with cantonal authorities.
Greece’s equivalent regime, introduced in 2020, charges €100,000 annually and allows up to 15 years of participation, mirroring Italy’s original structure. Portugal abolished its Non-Habitual Resident regime’s tax exemption for most foreign income in 2024, leaving only a narrow scope for certain pension and employment income. Spain offers a more limited impatriado regime that applies only to employment and some capital income, with rates up to 47 per cent after certain thresholds.
Italy’s €300,000 charge places it at the upper end of European flat-tax structures, but its breadth—covering all foreign income, with no upper limit—and its lack of wealth reporting or inheritance tax on foreign assets give it advantages for individuals with substantial offshore portfolios.
Policy Trajectory
The doubling of the rate in August 2024 via Law Decree No. 113, followed by a further fifty per cent rise in 2026, reflects political consensus that the programme should be reserved for those at the very top of the wealth distribution. The absence of any move to abolish or dilute the regime, even as several European neighbours have curtailed their own incentives, suggests bipartisan support for attracting ultra-high-net-worth families willing to establish genuine residency and spend material sums within Italy.
Private advisers report continued interest from individuals leaving the United Kingdom, where the remittance basis was restricted in April 2025, and from entrepreneurs in emerging markets seeking a European base with predictable tax treatment and no exchange-of-information obligations for pre-immigration wealth.
Interaction with Italian-Source Income
All Italian-source income—including employment, self-employment, real estate income, and capital gains on Italian assets—remains subject to progressive rates under Italy’s ordinary tax code. The top marginal rate is 43 per cent on income above €50,000, with regional and municipal surcharges adding up to 3.3 percentage points in some municipalities.
Participants in the flat-tax regime who derive income from Italian business activity, property, or capital therefore face ordinary taxation on that stream. The substitute tax applies exclusively to income arising outside Italy. This limits the regime’s utility for individuals whose wealth-generation activities are tied to Italy itself, and makes it best suited to those with substantial offshore investment portfolios, intellectual property holdings, or business interests managed from abroad.
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Retiree Flat Tax
Italy offers a separate flat-tax regime for retirees relocating to municipalities in southern regions—Calabria, Campania, Sicily, Sardinia, Basilicata, Abruzzo, Molise, and Puglia—with populations below 20,000. The regime imposes a seven per cent flat rate on foreign-source pension and other income for up to ten years.
This programme targets a different demographic and income bracket. It does not require a lump-sum payment and is available to pensioners who have not been Italian tax residents in the preceding five years. It is administered separately and does not share the €300,000 threshold or the nine-out-of-ten-year exclusion rule of the high-net-worth regime.
Outlook
The escalation in cost suggests the Italian treasury views the regime as a tool for attracting a smaller number of very wealthy families rather than a broad incentive for moderately affluent professionals. For individuals or couples with annual foreign income above €1.5 million, according to advisory firms, the €300,000 charge remains competitive, particularly when account is taken of Italy’s exemption from inheritance tax and wealth reporting on offshore assets.
Whether further increases lie ahead will depend on political appetite and revenue optimisation. The grandfathering of earlier participants suggests legislative stability, but the rapid succession of increases since 2024 indicates that Italy is prepared to raise the price if demand remains robust.
Sources
- PwC Tax Summaries – Italy Individual Taxes on Personal Income
- The Italian Lawyer – Italy’s Flat Tax: A Guide for Investors
- IMI Daily – Italy Raises Its Flat Tax to €300,000
- Lexology – Italian Special Regime for HNWI: Latest Update
- Global Citizen Solutions – Italy Flat Tax Regime: The Ultimate Guide for Investors
