Italy’s €300,000 Flat Tax for New Residents: Why Extending the Regime to the Spouse Can Be Crucial

Italy’s New Residents Tax Regime under Article 24-bis TUIR

Italy’s so-called New Residents Tax Regime, governed by Article 24-bis of the Italian Income Tax Code (TUIR), is one of the measures introduced to attract high-net-worth individuals with substantial international assets and foreign-source income to Italy.

Subject to specific statutory requirements, an individual who transfers his or her tax residence to Italy may elect to apply a lump-sum substitute tax on qualifying foreign-source income, instead of being subject to ordinary Italian personal income tax (IRPEF) on that income.

One of the key eligibility requirements is that the individual must not have been an Italian tax resident for at least nine out of the ten tax years preceding the year in which the option becomes effective.

The regime can therefore be particularly relevant for individuals with internationally diversified wealth, as it replaces ordinary Italian taxation on qualifying foreign-source income with a predetermined annual tax, irrespective of the overall amount of foreign income falling within the scope of the regime.

How Much Is the Italian New Residents Flat Tax in 2026? €300,000 for the Main Taxpayer and €50,000 for the Spouse

The amount of the substitute tax has changed over time.

The regime originally provided for an annual lump-sum tax of €100,000. For individuals transferring their tax residence to Italy after 10 August 2024, the amount was increased to €200,000.

The 2026 Italian Budget Law subsequently increased the amount to €300,000 per year and increased the amount applicable to each family member included in the regime from €25,000 to €50,000 per year. These new amounts apply to individuals transferring their tax residence to Italy from 1 January 2026 onwards.

Accordingly, for an individual moving to Italy in 2026 and electing for the regime, the applicable framework is:

The regime may be applied for a maximum period of 15 tax years, subject to the statutory rules governing termination or early revocation.

It is therefore essential to distinguish between the tax position of the principal taxpayer and that of each individual family member: the extension of the regime to a family member is not an automatic consequence of the principal taxpayer’s election.

The Spouse: A Tax Election That Should Not Be Overlooked

One of the most important issues to address when planning a move to Italy concerns the tax position of the spouse.

Article 24-bis allows the special regime to be extended to certain family members, including the spouse, provided that the applicable statutory requirements are satisfied.

Where the regime is validly extended, the spouse’s qualifying foreign-source income is subject to the substitute tax applicable to the family member, currently €50,000 per year for individuals transferring their tax residence to Italy from 2026.

This election can be particularly relevant where the spouse owns:

• foreign shareholdings;
• dividends and other investment income;
• financial portfolios held with foreign banks or investment firms;
• foreign bank or bond interest;
• real estate located outside Italy;
• income from professional activities carried out abroad;
• foreign-source capital gains and other miscellaneous income;
• other investments or assets located outside Italy.

What Happens If the Spouse Is Not Included in the Italian Flat Tax Regime?

This is a particularly important issue.

The principal taxpayer’s election under Article 24-bis does not automatically extend the flat tax treatment to the spouse’s foreign-source income.

If the spouse also becomes an Italian tax resident but is not included in the special regime, his or her tax position must be analysed separately under the ordinary Italian tax rules.

As a general principle, Italian tax residents are subject to worldwide taxation: they are generally required to report in Italy their income wherever it is earned or generated, subject to applicable domestic rules, tax treaties and any special tax regimes.

This leads to a practical consequence that is sometimes overlooked when planning an international relocation:

If a spouse becomes an Italian tax resident but does not elect into the Article 24-bis regime, the spouse’s foreign-source income is not “absorbed” by the €300,000 flat tax paid by the principal taxpayer.

Instead, such income must generally be analysed under the ordinary Italian tax rules, potentially giving rise to IRPEF, together with the relevant reporting, foreign-asset monitoring and wealth-tax obligations, depending on the nature of the assets and income involved.

Spouse Flat Tax vs. Ordinary Taxation: The Difference Can Be Significant

The distinction can be illustrated through two simplified scenarios.

Scenario A – The Spouse Is Included in the Regime

The principal taxpayer and the spouse both qualify for the New Residents Tax Regime and the election is extended to the spouse.

The principal taxpayer pays the substitute tax applicable under Article 24-bis, while the spouse pays the substitute tax applicable to an eligible family member.

For foreign-source income falling within the scope of the election, the substitute tax replaces ordinary Italian taxation.

This can be particularly significant where the spouse holds substantial foreign financial or real-estate assets and generates significant investment income over time.

Scenario B – The Spouse Becomes an Italian Tax Resident but Is Not Included

The principal taxpayer elects for the New Residents Tax Regime, while the spouse also becomes an Italian tax resident but remains outside the special regime.

In this case, the principal taxpayer’s €300,000 flat tax does not cover the spouse’s foreign-source income.

The spouse must therefore be analysed as a separate Italian tax resident and, as a general rule, must report his or her foreign-source income under the ordinary Italian tax system.

The consequences are not limited to income taxation. Depending on the assets and investments involved, the spouse may also have to consider:

• foreign-asset reporting and monitoring requirements;
• IVIE, the Italian wealth tax on certain foreign real estate;
• IVAFE, the Italian wealth tax on certain foreign financial assets;
• specific substitute taxes applicable to particular categories of income;
• the application of double-tax treaties;
• reporting obligations relating to foreign income and assets.

For this reason, the decision concerning the spouse should ideally be taken before the transfer of tax residence, following a comprehensive review of the couple’s assets, income, investment jurisdictions and previous tax history.

Are Foreign-Source Income and Assets Really “Absorbed” by the Italian Flat Tax?

A technically accurate formulation is important.

Article 24-bis does not create a general exemption for all foreign income or foreign assets. Rather, it provides for a lump-sum substitute tax on qualifying foreign-source income falling within the scope of the election.

The source of income is determined by reference to the criteria set out in Article 165(2) of the TUIR, using criteria that broadly mirror those contained in Article 23 of the TUIR for determining income sourced in Italy.

Depending on the specific circumstances, the regime may therefore cover categories of income such as:

• income from real estate located outside Italy;
• investment income paid by foreign entities or non-Italian residents;
• employment income relating to activities performed abroad;
• self-employment income arising from activities carried out abroad;
• business income attributable to activities carried out through foreign permanent establishments;
• certain capital gains arising from the disposal of interests in non-Italian companies;
• other miscellaneous income connected with foreign activities or assets located abroad.

The scope of the regime must nevertheless be analysed income category by income category and jurisdiction by jurisdiction, also taking into account any foreign jurisdictions that may be excluded from the election.

An Important Exception: Qualified Shareholdings During the First Five Years

The Italian flat tax does not automatically apply to every type of foreign-source income.

In particular, capital gains arising from the disposal of qualified shareholdings within the meaning of Article 67(1)(c) of the TUIR are excluded from the substitute tax during the first five tax years covered by the election.

Such capital gains remain subject to the ordinary Italian tax rules.

This provision is particularly relevant when considering corporate reorganisations, disposals or other liquidity events involving foreign shareholdings during the first years following the transfer of tax residence to Italy.

The timing and tax consequences of any planned disposal should therefore be reviewed before the relocation and before implementing the Article 24-bis election.

Compliance Benefits: Foreign-Asset Reporting, IVIE and IVAFE

One of the most significant features of the regime concerns tax compliance simplification.

For income and assets falling within the scope of the Article 24-bis regime, the taxpayer benefits, subject to the statutory conditions and applicable administrative guidance, from exemptions from certain ordinary foreign-asset reporting requirements and from IVIE and IVAFE.

This can be an important element when assessing the overall economic impact of the regime, particularly for individuals holding substantial foreign financial portfolios or real-estate investments.

It should not, however, be interpreted as a blanket exemption from all Italian tax reporting obligations.

The taxpayer must determine which income and assets actually fall within the scope of the election and which remain subject to ordinary Italian reporting and taxation rules.

What If the Spouse Failed to Report Foreign Income in Previous Years?

This issue requires particular attention when preparing for a move to Italy.

If the spouse becomes an Italian tax resident and, because he or she was not included in the Article 24-bis regime, should have reported certain foreign-source income or foreign financial and real-estate assets in Italy, the failure to report previous tax years is not automatically cured by the principal taxpayer’s election for the flat tax.

The spouse’s tax position must be reconstructed independently, considering, for each relevant tax year:

1. the spouse’s actual tax residence;
2. the nature and amount of foreign-source income;
3. the location of financial and other assets;
4. applicable foreign-asset reporting obligations;
5. the potential application of IVIE and IVAFE;
6. taxes already paid abroad;
7. applicable double-tax treaties;
8. the available procedures for correcting or regularising previous non-compliance.

Any regularisation should be assessed on a year-by-year basis, taking into account omitted or incorrect tax returns, tax liabilities, interest, applicable penalties and any available tax-compliance or voluntary-disclosure mechanisms.

For this reason, a genuine personal and family tax due diligence should ideally be performed before moving to Italy, rather than simply calculating the annual cost of the flat tax.

Practical Example: The Spouse’s Foreign Wealth

Consider a married couple transferring their tax residence to Italy in 2026.

The husband owns foreign shareholdings, financial investments and real estate and elects for the Italian New Residents Tax Regime.

The wife also owns a foreign investment portfolio and several properties located outside Italy.

If the wife is validly included in the election and the statutory requirements are met, the substitute tax applicable to her position will be €50,000 per year.

If, on the other hand, the wife becomes an Italian tax resident but is not included in the regime, her foreign-source income is not covered by the €300,000 paid by her husband.

Her tax position must instead be managed under the ordinary Italian tax rules, including, as applicable, income taxation, foreign-asset reporting and wealth taxes.

The economic difference can be substantial and may become increasingly significant over time where the spouse has substantial investment income, capital gains or sizeable foreign financial and real-estate assets.

The Decision Should Be Made at Family Level, Not Solely at Individual Level

The New Residents Tax Regime is often analysed primarily from the perspective of the individual generating the highest amount of income.

A proper international tax-planning approach should instead consider the entire family unit.

Before relocating to Italy, the following steps should generally be considered:

• identify all family members transferring their tax residence;
• verify the eligibility requirements applicable to each potential beneficiary;
• map foreign-source income by category and jurisdiction;
• prepare a comprehensive inventory of foreign real estate and financial investments;
• review foreign-asset reporting requirements;
• model the ordinary Italian tax burden for each family member;
• model the cost of extending the flat tax to each eligible family member;
• review any planned capital gains during the first five tax years;
• assess whether any foreign jurisdictions should be excluded from the regime;
• identify previous tax years requiring review or potential regularisation.

The comparison between the €50,000 annual substitute tax applicable to the spouse and ordinary Italian taxation should therefore not be based solely on annual income.

It should also take into account the spouse’s foreign wealth, the nature of the investments, applicable wealth taxes, foreign-asset reporting obligations and the expected 15-year duration of the regime.

Conclusion

Italy’s New Residents Tax Regime is a significant international tax-planning tool, but its implications should not be assessed solely by reference to the principal taxpayer.

The spouse’s tax position can be equally important.

If the spouse becomes an Italian tax resident but is not included in the Article 24-bis election, his or her foreign-source income generally remains subject to the ordinary Italian tax rules. This means that worldwide income may need to be reported in Italy and that, where applicable, foreign financial and real-estate assets may trigger additional reporting and wealth-tax obligations.

Conversely, where the spouse is validly included in the regime, qualifying foreign-source income falling within the scope of the election is subject to the substitute tax applicable to the family member, currently €50,000 per year for individuals transferring their tax residence to Italy from 2026, together with the relevant compliance simplifications provided by the regime.

The decision whether to extend the regime to the spouse should therefore be made before the transfer of Italian tax residence, based on a comprehensive analysis of the family’s income, assets, investment jurisdictions and historical tax position.

For individuals who are already Italian tax residents and subsequently identify undeclared foreign income or assets belonging to the spouse, it is advisable to carry out a prompt reconstruction of the relevant tax years and an assessment of the available regularisation procedures, before any potential tax audit or enforcement action is initiated by the Italian Revenue Agency.