In brief
In the context of the 2026-2028 budget plan which provides for interventions of about EUR 18 billion per year, the Italian Government has published the draft of the 2026 Budget Law which will be presented to the Italian Parliament for its approval and under which the substitute tax on foreign-source income for new residents is expected to be increased from EUR 200,000 to EUR 300,000.
In detail
This special flat tax regime for wealthy individuals who transfer their tax residence to Italy was introduced in 2017 and provided for a fixed tax of EUR 100,000, reduced to EUR 25,000 for family members. In August 2024, the tax was doubled to EUR 200,000, leaving the amount of EUR 25,000 for family members unchanged. After just over a year, the Government intends to raise the tax again to EUR 300,000 for the main taxpayer and EUR 50,000 for family members.
The draft of law contains a grand-fathering provision which limits the application of the tax increase only to those individuals who have transferred their residence to Italy within the meaning of the Italian Civil Code after 1 January 2026, date of entry in force of the Law. Pursuant to Article 43 of the Italian civil Code, the residence is the place where the person has his habitual abode.
As a result those who have transferred their residence to Italy until the date of 10 August 2024 will continue to pay the flat tax in the amount of EUR 100,000, reduced to EUR 25,000 for their family members, those who transferred their residence after 10 August 2024 and until the end of the year 2025 will continue to pay a tax of EUR 200,000, reduced to EUR 25,000 for their family members.