Italy Flat Tax Regimes: Three Options and Other Flat Rates

Italy taxes individual income progressively. Three bands (23% up to 28,000 euro, 33% from there to 50,000, and 43% above that) plus a regional and a municipal surtax charged on the same base. That is the ordinary system, and for most residents it is the whole story.

Alongside it, Italy operates a set of special regimes that replace progression with a fixed charge. Three of them are flat taxes in the proper sense of the term: the regime for new residents under article 24-bis, which substitutes a single annual amount for tax on all foreign income; the 7% regime for holders of foreign pensions who settle in qualifying municipalities; and the regime forfettario for small-scale self-employment. Together these are what people mean by the Italy flat tax regimes, and this guide covers all three.

Two clarifications before starting, because both are routinely got wrong.

First, employment income has two regimes of its own, the inbound worker regime and the one for professors and researchers returning to Italy, which are frequently described as flat taxes and are not. They do not fix a rate; they reduce the taxable base, and ordinary progressive rates then apply to what is left. The distinction matters when you model the outcome.

Second, whichever regime applies to you, and equally if none does and you are on ordinary IRPEF, certain categories of income are taxed at a fixed rate regardless. Dividends and most capital gains at 26%, crypto-assets at 33% from 2026, residential rents at 21% or 10% by election, and interest on government bonds and equivalent securities at 12.5%. There is, in other words, no single flat tax in Italy but a layered set of them, and the layers combine.

First: All of This Depends on Being Tax Resident

Every regime described here presupposes that you are, or are becoming, an Italian tax resident. Two of the three additionally require that you were not resident for a defined number of preceding years, which means the test has to be applied backwards as well as forwards.

Since 2024 residence turns on four alternative criteria: habitual abode, domicile as newly defined by reference to personal and family relationships, physical presence counting fractions of days, and registration on the municipal register, which is now a rebuttable presumption rather than an absolute one. Any one of them, met for the greater part of the year, is enough. The subject has its own guide, and anyone considering one of these regimes should read it first, because a mistake there invalidates everything downstream.

The Regime for New Residents: A Fixed Annual Charge on Foreign Income

Under article 24-bis, an individual who moves their tax residence to Italy can elect to pay a single fixed amount each year in place of income tax on all foreign-source income, however large that income is and whatever categories it falls into. Italian-source income remains taxed in the ordinary way.

The Amount Depends on When You Moved

This is the point most published guidance gets wrong, because the figure has been raised twice in eighteen months and each increase applied only to new arrivals. There are now three cohorts, and someone already inside the regime keeps the amount that applied when they entered it.

The increases operate on the date of transfer, not on the tax year, so the question to ask about any published figure is which cohort it describes. A guide quoting 200,000 euro is not wrong about the past; it is describing people who arrived before 2026.

Who Qualifies

The applicant must not have been tax resident in Italy for at least nine of the ten tax periods preceding the one in which the election takes effect. There is no restriction on where you come from (any country will do) and no requirement to be, or become, an Italian citizen. The election is made in the tax return for the year of transfer.

It can be extended to family members, each of whom pays the reduced amount shown above and is subject to the same conditions in their own right.

What It Covers, and the Exclusion Nobody Mentions

Foreign-source income is identified by mirroring the rules that determine what counts as Italian-source: foreign property income, capital income paid by foreign parties, employment carried on abroad, self-employment through a fixed base abroad, business income of foreign permanent establishments, gains on disposals of shares in non-resident companies, and other income from activities carried on or assets situated abroad.

One category is carved out, and it is the one that most often matters here: capital gains on the disposal of qualified participations realised during the first five tax periods of the election are excluded from the regime and taxed in the ordinary way. Anyone planning an exit from a substantial shareholding in the years immediately after arrival needs that timing in front of them before the move, not after.

What Comes With It

The election carries three collateral effects that are worth as much as the headline in some cases:

• no foreign asset reporting in the tax return;
• no wealth taxes on foreign real estate and foreign financial assets;
• inheritance and gift tax is limited to assets situated in Italy: foreign assets fall outside it for the duration.

That last point is the sharpest difference between this regime and the 7% one, where no such exemption exists. For a family whose estate sits largely outside Italy, it can dwarf the annual charge.

Excluding Particular Countries

You may elect not to apply the substitute tax to income produced in one or more specified States, either when the election is made or in a later return. Income from those States is then taxed in the ordinary way, and, importantly, the credit for foreign tax becomes available on it, which it is not for income covered by the substitute tax. Where a treaty rate is low and the underlying income large, carving a country out can be worth more than leaving it in.

Duration and Exit

The election runs for fifteen tax periods. It can be revoked, and revocation does not disturb the years already elapsed; it can also lapse if the conditions cease to be met or if the annual amount is not paid. Revocation or lapse prevents a fresh election being made later.

The 7% Regime for Holders of Foreign Pensions

The second regime charges 7% instead of a fixed amount, and it is aimed at a different person: someone with a foreign pension who is willing to settle in a smaller municipality in the south of Italy or in one of the areas struck by the central Italian earthquakes.

The first thing to correct is the most widely repeated error about it. The 7% is not a flat tax on all your income. It applies to income produced abroad (of any category, not only the pension) while Italian-source income continues to be taxed under the ordinary progressive rules. A guide that tells you otherwise will produce a calculation that is wrong by a wide margin for anyone with Italian income.

Who Qualifies

You must hold pension income paid by a foreign body. The perimeter is wider than a state pension: sums due after a working relationship ends qualify even where the underlying relationship was not employment, and one-off capitalisations paid against contributions can qualify too.

A pension paid by the Italian social security institution does not qualify on its own, but holding one alongside a foreign pension does not disqualify you.

You must also have been tax resident abroad for the five tax periods before the election takes effect, and must move from a country with which Italy has arrangements for exchange of information. And there is a precondition that catches people out: someone who never cancelled their registration on the Italian resident population register cannot make the election at all. If AIRE was never done, that has to be dealt with before anything else.

Where You Have to Move

The municipality must lie in Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise or Puglia (Basilicata is included, despite being omitted from several published lists) or among the municipalities affected by the 2016 and 2009 earthquakes. And it must have a population of no more than 30,000.

That threshold was 20,000 until 2026, and was raised by a law in force from 7 April 2026. A great deal of guidance still quotes the old figure, including sources reviewed in the last few weeks, and the difference is not academic: it brings a large number of towns into scope that were previously excluded.

Population is taken from the official statistics as at 1 January of the year before the first year of the election. And the election survives a move: from the second year onwards you can relocate to another qualifying municipality without losing it.

Duration, and How It Ends

The election is valid for the year it takes effect and the nine following: ten tax periods in total, not nine as often reported. It is exempt from foreign asset reporting and from the wealth taxes on foreign assets, and it too allows particular countries to be excluded, with the foreign tax credit becoming available for those.

It can be revoked; it lapses if the conditions fall away, including by moving to a municipality that does not qualify; and it lapses on failure to pay, unless payment is made by the balance deadline for the following year. Revocation or lapse rules out a later election. Where the election was not made in the return but the tax was paid on time, a late remedy is available on payment of a small penalty.

The Regime Forfettario for the Self-Employed

The third regime is domestic rather than inbound, and it is the one most widely used. It applies to individuals carrying on a business, a profession or an artistic activity on a small scale, and it replaces income tax and the surtaxes with a substitute tax of 15%, reduced to 5% for the first five years of a genuinely new activity, subject to conditions.

The most important feature of it is also the one most often left out, and leaving it out makes every comparison wrong. The substitute tax is not charged on your revenue. It is charged on a percentage of your revenue, fixed by a profitability coefficient attached to your business classification code, which varies substantially by activity. Actual costs are not deducted (the coefficient stands in for them) with the single significant exception of compulsory social security contributions, which are deducted from the base.

The practical consequence is that the regime is generous for activities with a low cost base and can be worse than ordinary taxation for activities with a high one. The rate tells you very little on its own.

The Thresholds

Revenue in the preceding year must not have exceeded 85,000 euro. Crossing 100,000 during the year ends the regime immediately, with effect from that year; between the two figures, the regime ends from the following year. And employment or equivalent income in the preceding year must not have exceeded 35,000 euro, a limit set for 2025 and extended to 2026 by the 2026 Budget Law.

One correction to a claim that circulates widely: the regime is not restricted to new businesses. The 5% rate is restricted to the first five years of a new activity, and carries its own conditions including not having carried on a similar activity in the preceding three years. The regime itself, at 15%, is open to existing businesses that meet the thresholds.

What Else Changes

Those inside the regime do not charge VAT on their invoices and do not recover it on purchases, are not subject to withholding on their fees and do not act as withholding agents themselves, and are outside the sector reliability indices. Electronic invoicing does apply. There is a list of exclusions (participation in certain transparent entities, arrangements that are substantially the continuation of previous employment, non-residents outside the European Economic Area) each of which has caught taxpayers who assumed the thresholds were the whole test.

Two Regimes That Are Not Flat Taxes

Employment income moving to Italy has two regimes of its own, and both are commonly listed alongside the three above. They do not belong there, because they work in a different way.

The inbound worker regime and the regime for professors and researchers returning to Italy both operate by exempting a portion of the qualifying income from tax. What remains enters the ordinary tax base and is taxed at the progressive rates, with the surtaxes on top. The effective rate is therefore not fixed: it depends on how much income there is, which bracket the untaxed remainder reaches, and where you live.

That makes them harder to model but not less valuable: for a salaried arrival they are frequently worth more than any regime on this page. The point is only that they answer a different question, and that comparing an exemption with a flat rate requires doing the arithmetic rather than reading the headline.

The Flat Rates That Apply Whatever Your Regime

Underneath all of this sits a layer that applies to everyone. Certain categories of income are removed from the progressive system by law and taxed at a fixed rate, whether you are inside one of the regimes above or on ordinary IRPEF. For many people with capital, this layer matters more than the brackets do.

Dividends and most capital gains on financial assets are taxed at 26%, generally by withholding at source or by substitute tax, and the income does not enter your total income at all. Interest on Italian government bonds and on equivalent securities, including debt issued by States on the approved list and by international bodies, is taxed at 12.5% instead. Gains on crypto-assets are taxed at 33% from 1 January 2026, with the previous exempt threshold removed. And residential rents can be taken out of income tax entirely by electing the cedolare secca, a substitute tax of 21%, or 10% for controlled-rent contracts in designated municipalities, which also replaces the surtaxes and the registration duty on the rent.

One consequence follows and is worth stating plainly. Italy taxes work heavily and capital comparatively lightly. A salary of 100,000 euro meets a marginal 43% plus surtaxes; a dividend of 100,000 euro meets 26%. Any comparison between Italy and another country that looks only at the income tax brackets is measuring the wrong thing.

Which One, and How They Interact

The three regimes are not alternatives between which a single person usually chooses. They select their own populations, and in practice the question is almost always which one you fall into rather than which one you prefer.

The regime for new residents suits someone with large foreign income and, very often, an estate held outside Italy: the fixed charge becomes proportionally cheaper the larger the income, and the inheritance and gift exemption can be decisive on its own.

The 7% regime suits someone with a foreign pension and moderate foreign income who is content to live in a qualifying municipality, and it fails immediately for anyone whose income is mostly Italian. The forfettario suits a low-cost self-employed activity within the thresholds and has nothing to do with either of the others.

What all three share is that the election is made in a return, on facts established earlier, and that getting the entry year wrong is not something a later filing can repair. The decision belongs to the period before arrival.

The exclusion for qualified shareholdings, the treatment of a foreign estate, whether a country is better carved out: these decide the outcome far more often than the headline figure does.

Avv. Marco Mesina, Founder of Move to Dolce Vita

Why Work with Us

We work from primary sources: articles 24-bis and 24-ter of the consolidated act and the legislation amending them, the 2014 law establishing the forfettario, and the Revenue Agency's circulars and published rulings, several of which decide, case by case, what counts as a foreign pension.

We assess eligibility before the move rather than after it, prepare advance rulings where a position deserves confirmation in writing, and handle the election and the annual compliance that follows.

And we look at the whole picture rather than the rate. The exclusion for gains on qualified shareholdings, the treatment of a foreign estate, whether a particular country is better carved out of the election: these decide the outcome far more often than the headline figure does.

Frequently Asked Questions

How much is the Italian flat tax for new residents?

It depends on when you moved. 300,000 euro a year for transfers of residence from 1 January 2026, 200,000 for transfers between 10 August 2024 and the end of 2025, and 100,000 before that. Family members pay 50,000 each under the current figures, 25,000 under the earlier ones. Those already in the regime keep the amount that applied when they entered.

Does the 7% regime apply to all my income?

No. It applies to income produced abroad, of any category. Italian-source income remains subject to ordinary progressive taxation. This is the single most common error in published guidance on the regime.

Which municipalities qualify for the 7% regime?

Municipalities of no more than 30,000 inhabitants in Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise or Puglia, or among those affected by the 2016 and 2009 earthquakes. The threshold was 20,000 until a change in force from April 2026, and much guidance still quotes the old figure.

Can I use a flat tax regime without moving to Italy?

No. All of them require Italian tax residence, and two of them additionally require that you were not resident for a defined number of preceding years.

Which Italy flat tax regime applies to me?

In practice you do not choose: each regime selects its own population. The new resident regime is for someone arriving with substantial foreign income, the 7% regime for a holder of a foreign pension willing to settle in a qualifying municipality, and the forfettario for small-scale self-employment carried on in Italy. The question is which one you fall into, and whether the timing of the move lets you into it.

Is the impatriati regime a flat tax?

No. It exempts a share of qualifying employment income; what remains is taxed at ordinary progressive rates with the surtaxes on top. The effective rate varies with income and with where you live.

What happens to my dividends if I am inside one of these regimes?

Foreign dividends fall inside the substitute tax under both the new resident and the 7% regimes. Italian dividends do not, and are taxed at the ordinary 26%, as they are for everyone else, whatever regime applies.

Can I leave a regime once I have elected into it?

Yes, by revocation, which preserves the years already elapsed. A regime can also lapse if conditions cease to be met or the tax is not paid. In either case a fresh election is not available afterwards.

Is the forfettario only for new businesses?

No. The 5% rate is limited to the first five years of a new activity and carries its own conditions. The regime itself, at 15%, is open to existing businesses within the thresholds.

Avv. Marco Mesina

Founder, Move to Dolce Vita · Avvocato, Milan Bar (Ordine degli Avvocati di Milano)

Marco is an Italian tax lawyer who advises individuals and families relocating to Italy on tax regimes, residency, citizenship, real estate and succession planning. Before founding Move to Dolce Vita he worked at Watson Farley & Williams, Withers and Deloitte in Milan.

• Milan Bar
• Citywealth Top 50 Italian Advisors 2025 & 2026
• Profiled by Forbes (2024)
• English · Italian · Spanish

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