Further possible increase of the Flat Tax in the draft 2026 Budget Law

The draft of the 2026 Budget Law introduces a new measure affecting the tax regime dedicated to so-called new residents, marking what could be a further rise in the substitute tax applied to High Net Worth Individuals (HNWI) who transfer their tax residence to Italy. The measure, included in the draft Budget Law 2026 approved by the Council of Ministers on 17 October 2025, is part of an ongoing process aimed at progressively aligning the Italian regime with European trends concerning the attraction of capital and high-income individuals.

At the core of the changes is Article 24-bis of the TUIR, which governs the optional substitute tax system on foreign-sourced income for taxpayers who decide to relocate their tax residence to Italy. This regime is designed to provide certainty, simplification, and a fixed levy on foreign income, replacing the ordinary progressive taxation system. The transfer of tax residence—proven through registration with the local registry office or actual presence in the country for most of the tax year—is the essential requirement to access the benefit, along with having not been a tax resident in Italy for nine of the previous ten years. Taxpayers may also choose to extend the regime to family members who likewise transfer their residence.

The expected evolution of the measure highlights a clear trend of progressively increasing the levy: from the €100,000 introduced in 2017, it was raised to €200,000 by Decree-Law No. 113/2024 in August 2024. Now, the 2026 Budget Law draft proposes a further increase: for new elections made from 1 January 2026 onward, the annual substitute tax on foreign income would be set at €300,000. At the same time, the amount due for each family member adhering to the regime would also rise, from €25,000 to €50,000 annually. The maximum duration of fifteen years would remain unchanged, as would the taxpayer’s option to exclude specific countries of origin of foreign income from the application of the flat tax.

Payment of the tax must be made in a single installment by 30 June each year, using the F24 form and the dedicated tax code (NRPP). The option—either exercised directly in the tax return or preceded by a ruling request to the Italian Tax Agency—is considered finalized in the tax year in which the taxpayer becomes resident or, alternatively, in the following year. The regime’s effectiveness is automatically renewed until its natural expiration unless the taxpayer revokes it, fails to make the payment, or transfers their residence abroad. These events trigger immediate termination and also affect participating family members.

In addition to the lump-sum tax, the legislator would confirm a series of ancillary benefits that represent one of the regime’s key points of attractiveness: new residents and their families are exempt from foreign asset reporting (Form RW), are not subject to IVIE and IVAFE, and may also benefit from exemption from inheritance and gift tax with respect to assets held abroad. These elements help make the system competitive and appealing for individuals with high international mobility.

The further increase of the flat tax for new residents would therefore reflect a specific fiscal strategy: on the one hand, increasing revenue from wealthier taxpayers while, on the other, maintaining a regime capable of attracting capital and talent, strengthening Italy’s role within the European landscape of special tax regimes.

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