Italy Flat Tax Regime: The Ultimate Guide for Investors

Italy offers several Italy flat tax regimes, each with different eligibility requirements and benefits. The main programs are designed for high-net-worth new residents, retirees moving to southern Italy, and self-employed individuals or small business owners.

One of the most popular and highly attractive is Italy’s flat tax regime for high-net-worth individuals. This is a special program that attracts high-net-worth individuals who move their tax residency to Italy. Under this regime, eligible individuals can pay a fixed annual tax of €200,000 on all foreign-sourced income, regardless of the amount. It offers a simplified and predictable tax structure and exemptions from wealth, inheritance, and foreign asset reporting. In addition to this, Italy also offers other flat tax options, including special regimes for pensioners and individual business owners.

This article will explain how Italy’s flat tax works, who qualifies, how to apply, and cover the other flat tax incentives available in Italy. This is what to expect:

• What is a flat tax regime?
• What is Italy’s Flat-Tax Regime for High-Net-Worth Individuals?
• Who is eligible for Italy’s Flat Tax?
• What are the Benefits of Italy’s Flat Tax Regime?
• How to Apply for the €200,000 Flat-Tax Regime
• Required Documents for the Italy Flat Tax Regime
• Does the Italy Flat-Tax Regime include Crypto Assets?
• What is the Italy 7% Flat Tax Regime?
• What is Italy’s Flat Tax for Business Individuals?
• What is Italy’s Regional Relocation Tax Incentive?
• Italy Flat Tax Regimes: Overview
• How to Get Tax Residency in Italy

What is a flat tax regime?

A flat tax regime is a tax system where individuals or companies pay a single fixed tax rate on their income, regardless of how much they earn. Unlike progressive tax systems, where rates increase with income, a flat tax simplifies taxation and provides predictability. Many countries use it to attract foreign investors, retirees, or high-net-worth individuals by offering a capped or fixed amount on global income, creating a stable and often lower tax burden compared to standard rates.

What is Italy’s Flat-Tax Regime for High-Net-Worth Individuals?

Italy’s flat tax regime for high net-worth individuals (HNWI), also known as Italy’s non-dom tax program, is a special incentive designed to attract wealthy individuals and new residents by offering favorable tax conditions on income derived from a foreign country.

In 2024, Italy doubled its flat tax regime and raised it from €100,000 to €200,000 annually. This means that for high-net-worth individuals who move their tax residency to Italy, the program allows them to pay income tax through a fixed tax rate of €200,000 annually on all foreign-sourced income, regardless of the amount, instead of the previous €100,000, with an additional €25,000 for each dependent.

This fixed tax rate replaces the usual national income bracket-based progressive tax rates and exempts them from wealth, inheritance, and foreign asset reporting obligations in Italy, as administered by the Italian government.

Who is eligible for the Italian Flat Tax?

To qualify for Italy’s flat tax regime for HNWI, you must meet specific eligibility criteria established by the Italian tax authorities. This tax regime can also be attractive to those who relocate under the Italy Golden Visa.

The requirements include:

• The applicant must not have been an Italian tax resident for at least nine out of the past ten years.
• The substitute tax applies only to foreign-sourced income, meaning earnings generated within Italy remain subject to standard income taxes.
• Eligible individuals can include business owners, self-employed individuals, retirees, and investors with foreign investments.
• Family members, spouses, children, and other dependents can be added to the regime by paying an additional €25,000 per person. They can benefit from the same substitute tax structure, significantly reducing tax liability for the entire household.
• Individuals must formally apply and receive approval from the Italian tax authorities before benefiting from the program.

What are the benefits of Italy’s Flat Tax Regime?

For those considering a move to Italy, the flat tax regime provides a tax-efficient way of living in Italy while minimizing tax liability and establishing residence.

• Flat Tax on non-Italian oncome: All non-Italian sourced income is taxed at a fixed €200,000 per year, regardless of the amount.
• Disapplication of CFC rules: Controlled Foreign Company (CFC) rules do not apply under this regime, reducing the compliance burden for offshore holdings.
• Extension to family members: Family members such as spouses and children can join the regime by paying a reduced €25,000 flat tax per person per year.
• No foreign asset reporting: Beneficiaries are exempt from reporting foreign assets under Italy’s RW form (IVAFE/IVIE reporting). However, qualified shareholdings must still be reported during the first 5 years.
• No wealth tax on foreign assets: Exempt from tax on foreign financial assets), tax on foreign real estate and Crypto-assets held abroad.
• No inheritance or gift tax on foreign assets: Assets transferred by gift or inheritance during the regime are exempt from Italian inheritance and gift taxes, as long as they are held outside Italy.
• Simplified tax filing: The flat tax replaces complex income reporting and removes many tax residency concerns for eligible individuals.
• Attractive for high-net-worth individuals: This tax regime particularly benefits high-net-worth individuals with foreign investments, business income, or multiple revenue streams.
• Low tax rate: Under the 7% flat tax regime, only 7% tax is charged on all foreign income, including pensions, interest, and dividends.
• No foreign asset reporting: Pensioners don’t have to report overseas assets.

How to Apply for the €200,000 Flat-Tax Regime

To apply for the flat tax regime, individuals must submit a request to the Italian tax authorities before filing their annual tax returns. The application process involves:

1. Confirm eligibility: You must not have been an Italian tax resident for at least 9 of the past 10 years before moving your tax residence to Italy. Family members can be included only if they meet the same condition.

2. Choose how to apply: You can apply in one of two ways

• Advance ruling: Submit a formal request to the Agenzia delle Entrate (Italian Revenue Agency) to confirm your eligibility before starting the regime.
• Direct election: Opt into the regime when filing your first Italian income tax return (Redditi PF) for the year you became a resident or the following year.

3. Prepare your documents: Gather all required documents listed in the checklist provided by the Agenzia delle Entrate. Make sure everything is complete and accurate before submission.

4. Submit your application:

• If using the ruling route: Send your request by hand, registered post, or certified email (PEC) to the Central Directorate of the Agenzia delle Entrate.
• If opting directly: Select the flat tax option in your tax return and attach the necessary documents.

5. Pay the flat tax: €200,000 per year for the main applicant and €25,000 per year for each dependent included. Payment is made using the F24 form by the standard income tax deadline. Failure to pay cancels the regime.

6. Stay compliant: The regime lasts up to 15 consecutive tax years. You can revoke it anytime, but once ended, it cannot be renewed. Only foreign-source income is covered by the flat tax; Italian-source income remains taxed normally.

Required Documents for the Italy Flat Tax Regime

These are the required documents for individuals interested in the Italian flat tax regime. They include documents that will also be requested by the Italian tax authority.

• Valid passport or national ID
• Codice Fiscale (Italian tax code)
• Proof of non-residency in Italy for at least 9 of the last 10 years (such as foreign tax returns or residency certificates)
• Declaration of intention to transfer residence to Italy
• Lease or property purchase contract for accommodation in Italy
• Registration with the local municipality (Anagrafe)
• Utility bills or other proof of residence
• Documents showing previous tax residency (where you paid taxes abroad)

“Checklist” form issued by the Agenzia delle Entrate

Supporting documents for the checklist, such as:

• Records of property owned or rented in Italy
• Bank account details
• Family connections
• Employment or business ties in Italy or abroad
• Details of foreign-source income and assets, including any jurisdictions to exclude from the flat tax

Does the Italy Flat-Tax Regime include Crypto Assets?

Yes, Italy’s flat tax regime includes crypto assets if they are held or traded through foreign platforms, meaning the income is considered foreign-sourced. Such crypto gains are covered by the fixed annual tax of €200,000 and are exempt from additional Italian taxes, including wealth and inheritance taxes. However, crypto income from Italian platforms is treated as Italian-sourced and taxed under the regular Italian tax rules.

What is the Italy 7% Flat Tax Regime for Pensioners?

Italy’s 7% Flat Tax Regime for pensioners is a tax incentive introduced to attract foreign retirees to relocate to certain areas of Italy, particularly in the southern and central regions. This regime offers a flat 7% tax rate on all foreign-sourced income, including pensions, dividends, interest, rental income, and capital gains. This regime can be especially attractive to those relocating under the Italy Elective Residency Visa.

How to qualify

To qualify for Italy’s 7% Flat Tax Regime for pensioners, you meet the following criteria:

• Receiving a pension from a foreign public or private institution.
• Must not have been a resident of Italy for the previous five years.
• Establishing official residence in a small Italian municipality (under 20,000 inhabitants) in Southern Italy.
• The 7% flat tax is applicable for up to nine consecutive years.

Qualifying regions in the South of Italy

You can move to any municipality with a population of 20,000 or fewer inhabitants in the following regions:

• Abruzzo
• Apulia (Puglia)
• Basilicata
• Calabria
• Campania
• Molise
• Sardinia
• Sicily

What is Italy’s Flat Tax for Business Individuals?

Italy’s flat tax regime for individual businesses, called the regime forfettario, is a flat tax system designed for small business owners, freelancers, and professionals involved in artistic or entrepreneurial activities. It offers a simplified tax structure with a standard flat tax rate of 15% on taxable income, calculated using a profitability coefficient on gross revenue. New businesses may benefit from a reduced 5% rate for the first five years, provided they have not carried out similar activities in the previous three years. One key advantage is that businesses under this regime do not charge VAT (IVA) on invoices, which makes administration easy and reduces compliance burdens.

How to qualify

• Must be an Italian tax resident or a resident of the EU/EEA
• At least 75% of total income must be earned in Italy
• Annual income or compensation must be below €85,000
• Employment income in the previous year must not exceed €35,000
• Employee-related expenses cannot exceed €20,000 per year

What is Italy’s Regional Relocation Tax Incentive?

Italy’s Regional Relocation Tax Incentive, also known as the “Inbound Workers Regime” (Regime Impatriati), is designed to attract professionals relocating to Italy by offering significant income tax exemptions. Under this regime, eligible individuals can benefit from a 70% exemption on employment or self-employment income earned in Italy.

This exemption increases to 90% for those who reside in Southern regions such as Abruzzo, Molise, Campania, Puglia, Basilicata, Calabria, Sardinia, and Sicily. This incentive is designed to attract skilled workers and professionals to Italy. It supports economic growth and helps reduce regional imbalances by encouraging people to move to less populated areas in the South.

How to qualify

• Must have lived outside Italy and not been a tax resident for at least the past two years
• Must commit to living in Italy for at least five years
• Available to both employees and self-employed individuals
• The initial tax benefit duration is five years
• Can be extended if you purchase a home in Italy or have dependent children

Italy Flat Tax Regimes: Overview

How to Get Tax Residency in Italy

Tax Residency in Italy refers to the status determining whether an individual is subject to paying taxes in Italy. You are considered an Italian tax resident if, for most of the year more than 183 days or 184 days in leap years, you meet any of the following conditions:

• You are registered as a resident in the official population registry (Anagrafe) in Italy.
• Your main place of business or economic interests is in Italy.
• Your habitual abode or primary residence is in Italy.

Italian tax residents must pay tax on their global income this tax called Imposta sul Reddito delle Persone Fisiche (IRPEF in Italy. Non-residents are taxed only on income earned within Italy. Establishing tax residency is crucial for individuals planning to move to Italy, as it affects their tax obligations and eligibility for special tax regimes like the flat tax programs.

For those who hold both Italian and U.S. citizenship, it is important to know that Italy and the U.S. have agreements in place to prevent or reduce double taxation.

How Can Global Citizen Solutions Help You?

Global Citizen Solutions is a boutique migration consultancy firm with years of experience delivering bespoke residence and citizenship by investment solutions for international families. With offices worldwide and an experienced, hands-on team, we have helped hundreds of clients worldwide acquire citizenship, residence visas, or homes while diversifying their portfolios with robust investments. 

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