Mamma Mia: Italy as Your Ultimate Tax Destination—or Not?

Italy not only offers rich culture and great food to foreign visitors. Italians also strongly believe in favourable tax regimes for wealthy foreigners who choose to settle there.

Recently, several changes have been made to these tax benefits, but Italy can still be an excellent fiscal destination for some. Here is an overview.

What is it?

One of the most discussed favourable tax regimes is the so-called lump-sum tax regime for newcomers (“flat tax”), introduced in 2017 with the aim of attracting wealthy individuals to support the local economy.

The principle is simple: instead of applying progressive tax rates based on the amount of (foreign) taxable income, one pays a fixed annual amount, regardless of the size of that income. This applies only to income of non-Italian origin, which is typically the case for most immigrants.

What does this flat tax apply to?

The flat tax:

• Applies only to foreign income
• Can be applied for a period of 15 years from arrival in Italy
• Requires that the individual has not been a tax resident in Italy for at least 9 out of the previous 10 years
• Can be extended to family members for an additional fixed amount per person

This system replaces not only progressive income tax but also certain wealth taxes and inheritance taxes on foreign assets. Italy also generally has very low inheritance taxes (4%–8%), with substantial exemptions for direct heirs (€1 million per heir) and for more distant relatives (€100,000 per heir).

Who is this interesting for and why?

The flat tax system offers simplicity and predictability: you know exactly how much you will pay, regardless of the size of your foreign assets and income. People are looking for peace of mind and certainty, especially regarding their finances and tax situation.

At the same time, many costs can often be avoided or reduced—for example, the maintenance of complex international structures that are frequently set up to avoid or reduce taxation on income.

How much is the lump sum?

Initially, the flat tax amounted to €100,000 per year for the applicant and €25,000 per additional close family member.

In August 2024, this amount was doubled to €200,000 per year for new applicants. Existing regimes were not affected, which is positive as it builds trust and demonstrates respect from the tax authorities.

More recently (Law of December 30, 2025), the amount was increased again to €300,000 per year for new applicants (and €50,000 per close family member). Once again, existing arrangements remain unchanged, and the increased rate applies only from the law’s effective date: January 1, 2026.

Consequences of the recent increase

Due to this increase, the system is now mainly attractive for very large fortunes that generate substantial income, or for specific types of assets.

Consider, for example, individuals who have built wealth through investments in crypto-assets and are concerned about their tax treatment in their country of origin. Profits in this area can be significant, but so are the taxes governments increasingly seek to impose.

For such specific assets, a lump-sum regime can be appealing, as it avoids highly technical discussions about how crypto gains should be calculated, when they are realized (on the platform or upon conversion into fiat currency), etc. The flat tax can again bring simplicity and clarity.

Many other options in Italy beyond the flat tax

In addition to the flat tax regime, Italy offers several other fiscal advantages beyond the scope of this article. For example, there is the highly favourable “Impatriati” (expat) regime, aimed at certain employees and self-employed individuals, allowing tax reductions of 50% to 60% on taxable earned income, depending on the region, for a period of generally five years.

Italy also offers favourable tax regimes for dividends and certain capital gains, has no general wealth tax, and only limited inheritance tax.

Based on applicable double taxation treaties and proper tax-compliant structuring, entrepreneurs and companies often benefit from a combination of Italian tax residency and a Luxembourg holding structure.

Vanbelle Law Boutique has been assisting wealthy individuals, entrepreneurs, and companies for more than three decades in achieving an acceptable, clear, stable, and reliable tax framework—also in a location that is pleasant to live in. Italy can certainly be a strong option in this regard. Do not hesitate to contact us to explore together where you or your business could thrive, for the right reasons.