Italy’s Flat Tax regime has been one of the most attractive incentives in Europe for Ultra High Net Worth Individuals considering a relocation. With the 2026 Budget Law, the italian government has introduced a new adjustment that raises the annual substitute tax from Euro 200.000 to Euro 300.000 for the main taxpayer and from Euro 25.000 to Euro 50.000 for each eligible family member.
Yet, despite the headline increase, the core appeal of the regime and Italy’s broader advantages for UHNWIs remain solid and unchanged.
Who is protected from the Flat Tax increase
The new thresholds apply only to individuals who will establish their civil residence in Italy from 1 January 2026 onwards.
Those who take up residence by 31 December 2025 will continue to benefit from the current rates of Euro 200.000 for the main taxpayer and Euro 25.000 for each family member.
How the Flat Tax regime works
Introduced in 2017, the regime under Article 24-bis of the Italian Income Tax Code allows new residents to replace ordinary taxation on foreign-source income with a fixed annual payment, irrespective of the amount of worldwide income generated.
Key conditions and features include:
• The taxpayer must not have been fiscally resident in Italy for at least nine of the previous ten tax years.
• Foreign-source income is covered by the flat tax, while Italian-source income remains subject to ordinary taxation.
• The regime lasts 15 tax years and can be voluntarily revoked at any time.
• The option can be extended to qualifying family members, currently for Euro 25.000 each, rising to Euro 50.000 from 2026.
