Flat tax increase for HNWIs

Flat tax increase for HNWIs

Art. 3 of the "Omnibus" decree (Decree Law No. 113/2024, published in Official Gazette No. 186 of Aug. 9, 2024) approved by the Italian government has upwardly modified the so-called "flat tax," or the substitute tax levied on the income of those who transfer their tax residence to Italy.

The flat tax provided by Art. 24-bis TUIR for individuals who transfer their residence to Italy is doubled from 100,000 euros to 200,000 euros, thus changing the favorable regime that was introduced in 2017 in order to incentivize HNWIs - High Net Worth Individuals- to enter Italy.

The change in the substitute tax should apply to income earned abroad by individuals who transfer their tax residence to Italy after the decree's effective date and, therefore, apply to those who become resident for tax purposes in Italy as of 2025.

Although the change may appear to be a disincentive to transfer tax residence to Italy for individuals with substantial foreign-source income, the fact remains that Italy is one of the few states in the European Union that continues to offer facilitative regimes of this type, given the substantial pejorative changes that other states, such as Portugal and, outside the EU, the United Kingdom, have introduced in the recent period.

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The content of this article is intended to provide general guidance on the subject. You should seek specialized advice regarding your specific situation.