Italy Flat Tax Regime: The Ultimate Guide

Italy’s flat tax regime is a special program to attract 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 Italy’s Flat-Tax Regime?
• 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
• Does the Italy Flat-Tax Regime include Crypto Assets?
• What is the Italy 7% Flat Tax Regime?
• Italy’s Flat Tax for Business Individuals
• Italy’s Regional Relocation Tax Incentive
• Italy Flat Tax Regimes: Overview
• Tax Residency in Italy
• Italy’s Tax System

What is Italy's Flat-Tax Regime?

Italy’s flat tax regime, 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.

Italy doubled its flat tax regime. 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 €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.

To qualify, applicants must not have been a tax resident of Italy for at least 9 of the previous 10 years. You can use this flat tax for up to 15 years, which makes it a good option for foreign investors, business owners, and retirees who want a simple and clear way to pay income tax while living in Italy. But it only applies to income from a foreign country. Any income from Italian sources is still taxed under the regular national income bracket rates of 23% to 43%.

A separate but related incentive exists for foreign pensioners, who can move to qualifying towns in Southern Italy and benefit from a 7% fixed tax rate on all foreign country income for up to 10 years, provided they haven’t been a tax resident of Italy for the previous five years.

Who is eligible for the Italy Flat Tax?

To qualify for Italy’s flat tax regime, individuals 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:

1. The applicant must not have been an Italian tax resident for at least nine out of the past ten years.
2. The substitute tax applies only to foreign-sourced income, meaning earnings generated within Italy remain subject to standard income taxes.
3. Eligible individuals can include business owners, self-employed individuals, retirees, and investors with foreign investments.
4. 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.
5. 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. Confirming tax eligibility – Applicants must ensure they have not been Italian tax residents for at least nine out of the previous ten years.
2. Filing a formal request – Submission of an advance ruling request to the Italian tax authorities for approval.
3. Receiving confirmation – If approved, the individual is granted tax residency under the flat tax regime.
4. Annual payment – The substitute tax of €200,000 must be paid each fiscal year to maintain eligibility.

Once approved, applicants can also extend the benefits to their family members.

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?

The Italian 7% flat tax regime is a special tax program designed to attract foreign retirees and pensioners to certain regions in southern Italy. Qualified individuals pay a flat tax rate of 7% on all foreign-sourced income for up to 10 years.<

To be eligible, applicants must not have been tax residents in Italy for the previous five years and must establish their tax residency in designated southern municipalities. This regime can be especially attractive to those relocating under the Italy Elective Residency Visa.

Italy’s 7% flat tax regime is separate from the €200,000 flat tax regime, which is aimed at individuals with significant foreign income and has different eligibility criteria and benefits.

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

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.

How to qualify

To qualify, individuals must be tax residents in Italy or residents in the EU/EEA who earn at least 75% of their income in Italy, have annual revenues or compensation below €85,000, and must not have earned employment income over €35,000 the previous year. Additionally, employee-related expenses cannot exceed €20,000 annually.

One key advantage is that businesses under this regime do not charge VAT (IVA) on invoices, which makes administration easy and reduces compliance burdens.

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.

How to qualify

To qualify, you must have lived outside Italy and not been a tax resident there for at least the past two years. You must also commit to living in Italy for at least five years. This tax benefit is available to both employees and self-employed individuals. It lasts five years, but it can be extended if you buy a home in Italy or have dependent children.

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.

Italy Flat Tax Regimes: Overview

Tax Residency in Italy

Tax Residency in Italy refers to the status determining whether an individual is subject to Italian taxation on their worldwide income. 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, while 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.

Italy's Tax System

Taxes in Italy include both national and local taxes that apply to individuals, businesses, and other entities. The main taxes are income tax, value-added tax (VAT), corporate tax, property taxes, and social security contributions.

Personal income tax (IRPEF) is progressive, with rates from 23% to 43%, depending on how much you earn. Residents pay tax on their worldwide income, while non-residents are taxed only on income earned in Italy. Corporate income tax (IRES) is charged at a flat rate of 24%. Businesses also pay a regional tax on productive activities (IRAP), which ranges from 3.9% to 4.82%, depending on the region.

VAT (IVA) is applied to most goods and services at a standard rate of 22%, with reduced rates of 10% or 4% for certain products. Property owners pay local taxes such as IMU and TASI based on property value. Both employers and employees contribute to social security, with rates that vary by industry and job type.

The Italian Revenue Agency (Agenzia delle Entrate) oversees tax collection and compliance. Taxpayers must follow regular filing rules.

How Can Global Citizen Solutions Help You?

Global Citizen Solutions is a boutique investment migration consultancy firm focused on finding the right residency or citizenship by investment program for individuals wishing to secure their future and become global citizens. With offices in Portugal, the United Kingdom, Hong Kong, and Brazil, our multilingual team guides individuals and families from start to finish, providing expert advice considering freedom, mobility, taxation, and security.

• We have helped hundreds of clients from 35+ countries in all the top residency by investment and citizenship by investment programs. With an in-depth and comprehensive understanding of the area, we provide our clients with solid guidance. 
• Our team has never had a case rejected. Our 100 percent approval rate sets us apart from our competitors and guarantees that you can expect a successful application.
• Our transparent pricing covers all the processes from opening your bank account, document certification, and legal due diligence to investment and submission. As there is one fee for the entire process, you can be confident that you will not face any hidden costs later.
• All data is stored within a GDPR-compliant database on a secure SSL-encrypted server. You can be safe knowing that your personal data is treated with the utmost security.
• Global Citizen Solutions provides an all-encompassing solution. Our support can continue even after you receive your passport. We offer additional services such as company incorporation, Trusts, and Foundations formation.
• The BeGlobal Onboarding System® allows you to access the status of your application every step of the way, something that sets us apart from our competitors.

Frequently asked Questions about the Italy Flat Tax Regime

What is the Italy flat tax regime?

Italy’s flat tax regime is a special tax incentive for new residents who have not been tax residents in Italy for at least 9 of the previous 10 years. It allows them to pay a fixed €200,000 annual tax on all foreign-sourced income, regardless of the amount. Family members can join for an additional €25,000 each. The regime lasts up to 15 years and offers exemptions from wealth, inheritance, and foreign asset reporting.

What happens if I earn income in Italy while under the Flat Tax Regime?

Income generated within Italy is not covered by the Flat Tax Regime and is subject to standard Italian income taxes. The €200,000 flat tax applies only to foreign-sourced income.

Can I switch to the Flat Tax Regime after becoming an Italian tax resident?

No, the Flat Tax Regime is only available to individuals who have not been Italian tax residents for at least nine out of the past ten years. You cannot switch to this regime if you are already a tax resident.

What happens if I fail to meet the residence requirements?

Failure to meet the residence requirements may result in losing eligibility for the Flat Tax Regime. You would then be subject to standard Italian income taxes on your worldwide income.

Are there any wealth or inheritance taxes under the Flat Tax Regime?

No, individuals under the Flat Tax Regime are exempt from wealth tax, inheritance tax, and municipal income tax on foreign assets. However, Italian-sourced assets may still be subject to these taxes.

Can I include rental income from foreign properties in the Flat Tax Regime?

Yes, rental income from foreign properties is considered foreign-sourced income and is covered under the Flat Tax Regime. However, rental income from properties in Italy is subject to standard Italian taxes.

What happens after the 15-year period ends?

After the 15-year period, individuals will no longer be eligible for the Flat Tax Regime and will be subject to standard Italian income taxes on their worldwide income. To manage this transition, it is recommended that you plan ahead with a tax advisor.

Is the Flat Tax Regime available in all regions of Italy?

Yes, the Flat Tax Regime is available nationwide. However, individuals relocating to southern Italy may also benefit from additional incentives under the Regional Relocation ‘Resident Worker’ Tax Regime, which offers further tax reductions.

Can I apply for the Flat Tax Regime if I already own property in Italy?

Yes, owning property in Italy does not disqualify you from applying for the Flat Tax Regime, provided you meet the non-residency requirement (not being an Italian tax resident for nine out of the past ten years).

Can I combine the Flat Tax Regime with other Italian tax incentives?

No, the Flat Tax Regime cannot be combined with other special tax regimes in Italy. You must choose the regime that best suits your financial situation.

Can US Citizens qualify for the Italy Flat Tax Regime?

Yes, U.S. citizens can qualify for Italy’s flat tax regime if they move their tax residency to Italy and have not been Italian tax residents for at least 9 of the previous 10 years. They must also meet other eligibility requirements set by Italian tax authorities. This regime applies to foreign-sourced income, including income from the U.S.

What is the 7% Italy flat tax for pensioners?

Italy’s 7% flat tax regime is designed for foreign pensioners who relocate to certain municipalities in Southern Italy. Eligible individuals pay a flat 7% tax on all foreign-sourced income, including pensions, for up to 10 years. To qualify, one must not have been an Italian tax resident in the previous five years and must move to a town with fewer than 20,000 residents in regions like Sicily, Calabria, or Puglia. This regime exempts participants from wealth taxes and foreign asset reporting obligations.