The €100K Flat Tax in Milan: How It Works for Finance and PE Professionals
Italy's Article 24-bis regime charges a fixed 100,000 EUR per year on all foreign-sourced income, regardless of amount, for up to 15 years. The break-even versus ordinary Italian rates is approximately 233,000 EUR in annual foreign income. For a PE professional earning 3M EUR annually, the effective rate is 3.3%.
The Core Mechanics
The regime charges a fixed 100,000 EUR per year as a substitute tax on all income produced outside Italy. This covers dividends from foreign companies, interest from foreign bank accounts, capital gains from foreign securities, carry distributions from foreign funds, and rental income from properties outside Italy. Italian-sourced income, including salary from an Italian employer and Italian rental income, is taxed at ordinary progressive Italian rates reaching 43%. Additional family members can join the regime for 25,000 EUR per person per year.
Effective Rates at Different Income Levels
| Annual Foreign Income | Ordinary Italian Tax (43%) | Under 100K Regime | Effective Rate | Annual Saving |
|---|---|---|---|---|
| €233,000 | €100,000 | €100,000 | 43% | Break-even |
| €500,000 | €215,000 | €100,000 | 20% | €115,000 |
| €1,000,000 | €430,000 | €100,000 | 10% | €330,000 |
| €3,000,000 | €1,290,000 | €100,000 | 3.3% | €1,190,000 |
| €10,000,000 | €4,300,000 | €100,000 | 1.0% | €4,200,000 |
Does Carry Income from a PE Fund Qualify?
Carry distributions from a foreign-domiciled fund generally qualify as foreign-sourced income covered by the 100,000 EUR substitute tax. The specific characterisation depends on the fund structure and jurisdiction and must be confirmed with a qualified Italian commercialista before the election is filed. Dividends from US portfolio companies, interest from US accounts, and capital gains from US securities also typically qualify.
The Residency Requirement
The regime requires genuine Italian tax residency: registration with the Milan anagrafe (municipal population registry) and spending more than 183 days per year in Italy, or demonstrating Italy as your centre of vital interests. The Italian Revenue Agency has increased audit activity on flat tax elections and uses passport records, credit card geography, Italian mobile phone usage, and professional activity documentation to verify actual presence. The regime is for people who actually move to Italy, not for people who want a nominal address.
US Tax Interaction
American citizens remain subject to US federal income tax on worldwide income regardless of where they live. The 100,000 EUR fixed charge paid to Italy may qualify for the US foreign tax credit, but the interaction is not automatic or straightforward. This analysis must be conducted by a US tax attorney with international expertise before the regime is elected. The full programme analysis is in the €100K flat tax guide.
Frequently Asked Questions
What is the effective rate under the 100K regime at different income levels?
At 500,000 EUR annual foreign income: 20%. At 1M EUR: 10%. At 3M EUR: 3.3%. The break-even versus ordinary Italian rates is approximately 233,000 EUR in annual foreign income.
Can I leave Italy before the 15-year window ends?
Yes. The election can be revoked voluntarily at any time. There is no penalty for leaving before the fifteen-year window closes. Tax years in which the election applied are settled at the 100,000 EUR rate.