New UK Tax Rules Makes Italy’s Flat Tax Regime More Attractive

Italy may never have aimed to become a tax haven, but Article 24-bis of the Italian Income Tax Code has entered the conversation as one of Europe’s most compelling tax regimes for global wealth and long-term planning. With a flat 200,000 euro ($228,000) annual tax on foreign income, no reporting requirements on foreign assets, and optional coverage for family members, it offers a streamlined solution for international wealth planning.

Although the tax regime isn’t new, its relevance has grown significantly following the UK’s abolition of its longstanding non-domiciled tax status on April 6. The UK previously allowed globally mobile individuals to pay tax in the UK only on income and gains remitted to the country.

Now that the UK has moved to a residence-based taxation model, individuals who haven’t been UK tax residents in the previous 10 years are granted a four-year exemption on foreign income and gains upon relocating to the UK. After that period, they’ll be taxed on their worldwide income, like any other UK resident.

In this new global context, Italy has positioned itself as an attractive jurisdiction in Europe for individuals seeking a tax framework built on clarity, predictability, and long-term strategic potential.

Italy’s flat tax for new residents was introduced in 2017 as part of a broader strategy to attract high-net-worth individuals, entrepreneurs, and foreign investors. The tax is 200,000 euros per year for the principal applicant and 25,000 euros per year for each additional family member included.

According to figures released by the Minister of Economy on Aug. 7, 2024, a total of 1,186 taxpayers have opted in under Article 24-bis of the Italian Income Tax Code since its introduction in 2017. The Court of Auditors has estimated that 254 million euros in substitute tax has been collected under this regime between 2018 and 2022.

The tax regime is open to individuals of any nationality, including non-EU citizens and returning Italian nationals who meet two key criteria: They must transfer their tax residence to Italy and must not have been a tax resident in Italy for at least nine out of the last 10 years.

The flat tax applies exclusively to foreign-sourced income. Italian citizens presumed to be tax resident under anti-abuse rules (such as those registered in blacklisted jurisdictions) may qualify, provided they can prove actual non-residence during the required period.

Eligible income includes employment income earned abroad, dividends, capital gains, and returns from assets or rights held outside Italy. Capital gains on qualified shareholdings are included only if the sale takes place after five years of tax residence in Italy—a rule designed to discourage opportunistic relocations before major disposals.

Taxpayers may request an advance ruling (or interpello) from the Italian Tax Authority to confirm their eligibility and the correct application of the flat tax regime. This step is strongly recommended, especially for complex asset structures, cross-border income flows, or uncertainty regarding tax residency status in the previous decade.

The advanced ruling provides legal certainty, shielding the taxpayer from future disputes with the tax authorities and serving as robust documentation in the event of an audit. It also clarifies how the regime applies to specific income streams, family members, or situations involving previous ties to Italy.

If no interpello is submitted, taxpayers can request the tax in their first Italian tax return after establishing residence, with all supporting documentation retained. Here, the burden of proof remains entirely on the taxpayer—and the risk of post-facto challenges is significantly higher.

It’s also possible to exclude specific countries, choosing to pay ordinary tax on income from those jurisdictions (to benefit from foreign tax credits, for example). Once a jurisdiction is excluded, it can’t be re-added.

The regime lasts up to 15 years, with no option for renewal. It can be revoked earlier in the case of non-payment or loss of Italian tax residence or if it’s incompatible with other special tax regimes such as for retirees or impatriates.

Tax advisers must go beyond simply alerting clients of these changes. They should also initiate strategic, future-oriented conversations, including whether they:

• Plan to remain in Italy long enough to benefit fully from the 15-year window
• Have proper classification and documentation of foreign assets
• Expect to include family members in the tax regime Understand the dual structure that taxes Italian income at ordinary rates
• Recognize the benefits the flat tax offers for succession planning and its complete exemption from inheritance and gift tax on foreign assets
• Realize that alternative tax regimes (the lavoratori impatriati) may be more advantageous if they generate substantial income from Italian sources

The flat tax regime also has important implications for entrepreneurs, business owners, and investors considering Italy as a long-term base. Any income derived from an Italian business—whether through salary, dividends, or management fees—is taxed under ordinary progressive rates in Italy. This may be attractive for those who:

• Receive dividends or passive income from foreign companies, provided that such income is clearly sourced outside Italy
• Derive income from foreign business activities, without triggering a taxable presence in Italy
• Are considering relocating to Italy while maintaining business interests abroad

Advisers must proceed with caution. Using Italy as a personal base while maintaining business operations abroad may be compatible with the flat tax regime if the actual management of foreign companies and the performance of business activities don’t take place in Italy.

If an individual manages a foreign company from within Italy, or provides services to foreign clients from Italian soil, the income risks being reclassified as Italian-sourced and therefore being taxed under ordinary rules, or the foreign company may be deemed tax resident in Italy, based on the place of effective management test under both domestic tax law and OECD principles.

When properly structured—and with clear separation between personal presence in Italy and business operations abroad—the flat-tax regime can allow entrepreneurs to enjoy Italian residency and lifestyle while legally protecting their foreign income from Italian taxation. However, maintaining this balance requires careful legal, tax, and operational planning.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Claudia Bortolani is the founder and managing partner of Aliant Italy specializing in cross-border M&A, real estate, and complex conflict-of-law matters.

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