Flat Tax in Italy [How HNWIs Can Benefit]

The Flat Tax allows you living in Italy while paying only €200,000 in taxes on your worldwide income. But, there’s a lot of buzz—and even more confusion—about the flat tax in Italy.

Let me clear things up right away: “there isn’t just one flat tax”. There’s the flat tax for foreigners, one for Italian employees, one for retirees moving to southern Italy, one for self-employed Italians and lastly the incremental flat tax.

But hold on!

Here I will focus on what really matters: the flat tax for foreigners who want to make Italy their permanent home and pay a fixed annual rate of €200,000. Yes, you heard that right—just €200,000 (it was €100,000 in the past).

So, if your global income (not earned in Italy, of course) has you paying taxes exceeding €200,000 annually, then Italy might just be your personal tax haven. Keep reading if you’re a high-net-worth individual (HNWI) and want to discover how Italy can turn your tax bills into a dream come true!

How does Italy's flat tax work?

Back in 2017, Italy introduced a groundbreaking tax regime: the Flat Tax for wealthy non-domiciled residents. This special framework allows individuals to pay a fixed tax on income generated abroad.

Initially set at €100,000, the flat tax was increased to €200,000 in 2024 (per Decree Law No. 113/2024, converted into Law No. 143 of October 7, 2024 [1]).

Here’s how it works.

What are the requirements?

• Move your fiscal residence to Italy.
• Ensure you haven’t been a fiscal resident of Italy for at least 9 out of the last 10 years.

When are you considered a fiscal resident in Italy?

According to the TUIR (“Testo Unico delle Imposte sui Redditi” Unified Income Tax Act), you’re a fiscal resident in Italy—and taxed on your worldwide income—if, for more than 183 days (184 in leap years) in a given year, you meet at least one of the following three conditions:

• You’re registered with the Italian Population Registry (“Anagrafe italiana”).
• Your domicile is in Italy, meaning it’s the center of your personal and economic interests (as defined by Article 43 of the Italian Civil Code).
• Your habitual residence is in Italy, meaning where you actually live (again, per Article 43 of the Civil Code).

Key note: TUIR requires you to spend at least 183 days in Italy per year to qualify as a fiscal resident.

Now, I know what you’re thinking: “What’s the catch?” Let’s talk!

Difference between residence and domicile

The concepts of residence, domicile, and habitual abode may seem similar, but they refer to distinct aspects of where a person lives or is connected to.

Example: A foreign national living most of the year in Milan, managing their daily routine there, would have their residence in Milan.

Example: The same foreign national living in Milan may have their domicile in California if their main business operations, financial interests, or assets are based there.

Habitual Abode is simply the place where someone physically lives most of the time. It often overlaps with residence but focuses on the continuity and regularity of presence.

And now the "ResNonDom" concept.

The distinction between domicile and residence is foundational for the "ResNonDom" (Resident Non-Domiciled) concept. This regime allows individuals to relocate their residence to a country while maintaining their domicile elsewhere, benefiting from a special tax framework.

These regimes often tax only local income and exclude or favorably treat foreign income. It’s a strategy used by countries to attract high-net-worth individuals (HNWIs) by offering significant tax advantages while incentivizing relocation.

Practical implication: if you move your residence to a country offering a ResNonDom scheme (e.g., Italy with its flat tax regime), you can enjoy the lifestyle and benefits of living there without being taxed on your global income—provided your domicile remains abroad. This separation is a game-changer for individuals managing global wealth.

Discover the €200K Flat Tax Deal – Simplify your taxes in Italy Contact us to explore the benefits today!

The ResNonDom case in the UK

Ah, the drama of tax reforms! Jeremy Hunt, during the UK’s “Spring Budget,” dropped a bombshell by approving a tax reform that eliminates the beloved ResNonDom regime and replaces it with something new.

Starting April 6, 2025, ResNonDom residents in UK will automatically become domiciled, losing all those sweet tax advantages on foreign income. But that’s not all—offshore trusts, inheritance, and gifting rules are also getting a complete makeover.

So, what’s the replacement?

A new preferential tax regime for a maximum of four years of fiscal residence in the UK. Four years?! That’s barely enough time to unpack your boxes! And it’s only available to individuals who haven’t been fiscal residents in the UK for the previous ten years.

What’s the fallout?

Well, here’s my bold prediction: with the abolition of ResNonDom, a stampede of high-net-worth individuals (HNWIs) will head for tax-friendly havens like Switzerland, the UAE, Malta, Cyprus, Portugal, Monaco—or, you guessed it, Italy.

And guess who’s ready to welcome them with open arms? Me, of course!

According to well-placed sources, nearly 70,000 wealthy individuals are gearing up to leave the UK.

The Real Estate Ripple Effect

On the property front, it’s a tale of two markets.

Italy: one nation’s tax headache is another’s golden opportunity!

Do foreigners pay tax in Italy?

When clients ask me this, I like to say that the Italian tax authorities don’t care about your passport—they care about your circumstances. Whether you’re American, French, or Martian, if you meet one of these two conditions, you’re paying taxes in Italy:

1. You’re not a resident, but you earn income in Italy. Think business activities, renting out property, capital gains from Italian real estate, dividends, interest, or royalties from Italian entities, or profits from selling shares in Italian companies. In these cases, you’re taxed only on the income generated in Italy.
2. You’re considered a “fiscal resident” in Italy. If you qualify as a fiscal resident, you’re taxed on your worldwide income—not just what you earn in Italy.

Breaking it down with examples.

Case 1: The Simple Scenario

You’re an American citizen living in LA. You spend two months a year in Tuscany, where you own a villa that you rent out when you're not enjoying the dolce vita yourself. Naturally, you pay taxes in Italy on the rental income from the villa, but everything else stays under Uncle Sam’s jurisdiction.

Case 2: The Tricky One

Now imagine you decide to move full-time into that Tuscan villa. You’re still running your five luxury hotels in LA, raking in serious HNWI income, but you’re not working in Italy.

Here’s the kicker: since you’re now a resident of Italy, you’ll need to pay Italian taxes on your U.S.-generated income. Why? Because Italy doesn’t care where the money’s made—it cares where you live.

Relocate, Relax, Save – Learn how Italy’s ResNonDom scheme can transform your finances while you soak up the Italian sun. Contact us now!

Do US expats pay taxes in Italy?

Yes, U.S. expats in Italy are subject to Italian taxes if they:

• Spend more than 183 days a year in the country,
• Register with the Italian Population Registry, or
• Establish their domicile or habitual residence in Italy.

In such cases, U.S. expats must declare all income, wherever it’s earned. But don’t panic yet—thanks to the U.S.-Italy tax treaty, you can avoid double taxation. Taxes paid in one country can often be offset in the other using tax credits.

Double Taxation: Simplified

Countries that sign double taxation treaties establish agreements to prevent you from being taxed twice on the same income. These treaties outline:

1. Who gets to tax what. They specify which country has the primary right to tax certain types of income, such as wages, dividends, or property earnings.
2. How to handle dual residency cases. If you qualify as a tax resident in two countries (cue the headache), the treaty provides criteria to determine where your primary tax obligations lie. This could include looking at where your primary home is, where you spend most of your time, or where your economic interests are based.
3. Tax credits to the rescue. To avoid double taxation, these treaties allow you to offset taxes paid in one country against your tax bill in the other. This ensures you’re not paying the same income twice—well, at least not entirely.

In essence, double taxation treaties make it possible to navigate the tricky world of global income without losing sleep (or your entire bank account) over tax bills in two places. Think of it as a legal referee ensuring fair play between tax authorities.

Invest in La Dolce Vita – Take advantage of Italy’s unique tax regimes and elevate your lifestyle with unmatched savings and luxury! Let’s get in touch now!

FAQ

Are taxes higher in Italy or the USA?

The answer isn’t straightforward—it depends on your personal situation and the type of income you earn. Generally, U.S. federal taxes are lower but can be supplemented by state taxes. In Italy, taxes are progressive, meaning the more you earn, the higher your rate. However, Italy offers special regimes, such as the Flat Tax, that can significantly reduce your tax burden in specific cases.

What are the tax benefits of moving to Italy?

Italy provides several attractive tax incentives for newcomers. These include the ResNonDom regime, which offers a fixed tax rate on foreign income, and special incentives for retirees and professionals relocating to certain regions. Beyond taxes, Italy’s high quality of life, lower costs for some services, and the absence of state taxes (as seen in the U.S.) make the move financially appealing.

What is the “100K Rule” in Italy?

The "100K Rule" was a tax regime designed for wealthy individuals relocating their fiscal residence to Italy. Under this regime, foreign-sourced income was taxed at a flat rate of €100,000 per year (until 2024; then 200k), regardless of the total amount earned abroad. It’s valid for up to 15 years and can be extended to family members for an additional €25,000 per person.

Elena Manzhos: Mother of two beautiful children, wife, and real estate agent for over 15 years. More than 20 years ago,  I moved to Italy from Eastern Europe. I have always had a deep-seated passion for houses; as a child for the Barbie house, and now as a real estate professional, my love for luxurious properties is unwavering.
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