What Changed in 2026
Italy's 2026 Budget Law (Legge di Bilancio 2026), signed on December 30, 2025, made two changes to the Article 24-bis regime. The annual flat tax for individuals transferring Italian tax residence from 2026 onward was raised from 200,000 EUR to 300,000 EUR per year. The annual surcharge for qualifying family members was raised from 25,000 EUR to 50,000 EUR per person per year.
This is the second increase in two years. The original regime charged 100,000 EUR per year when introduced. The 2024 reform raised it to 200,000 EUR for new applicants. The 2026 reform raised it to 300,000 EUR for new applicants. In each case, grandfathering was confirmed for those who had already transferred residency.
Rate History and Grandfathering
| When You Transfer Residency | Annual Flat Tax | Family Member Rate |
|---|---|---|
| Before 2024 reform | 100,000 EUR (grandfathered) | 25,000 EUR |
| After 2024 reform, before 2026 Budget Law | 200,000 EUR (grandfathered) | 25,000 EUR |
| From 2026 Budget Law onward | 300,000 EUR | 50,000 EUR |
What the Programme Is
Article 24-bis of the Italian Consolidated Income Tax Code (TUIR) allows individuals who transfer their Italian tax residence to pay a substitute flat tax on all income produced abroad. Unlike the 7% programme, which is restricted to qualifying municipalities in southern Italian regions, the Article 24-bis regime has no geographic constraint. It applies nationwide -- Milan, Lake Como, Tuscany, Rome, Florence, and everywhere else in Italy.
The regime runs for fifteen years from the year of election. It can be revoked voluntarily at any time without penalty. It cannot be combined with the 7% southern Italy programme -- you elect one or the other.
The Break-Even Analysis
The break-even against ordinary Italian progressive income tax (top rate 43%) is the most important analytical frame for any potential applicant. At 300,000 EUR per year, the break-even is approximately 698,000 EUR in annual foreign income.
| Annual Foreign Income | Ordinary Italian Tax (43%) | Flat Tax (300K) | Effective Rate | Annual Saving |
|---|---|---|---|---|
| 698,000 EUR | 300,000 EUR | 300,000 EUR | 43% | Break-even |
| 1,000,000 EUR | 430,000 EUR | 300,000 EUR | 30% | 130,000 EUR |
| 2,000,000 EUR | 860,000 EUR | 300,000 EUR | 15% | 560,000 EUR |
| 5,000,000 EUR | 2,150,000 EUR | 300,000 EUR | 6% | 1,850,000 EUR |
| 10,000,000 EUR | 4,300,000 EUR | 300,000 EUR | 3% | 4,000,000 EUR |
The regime now clearly targets UHNW individuals with annual foreign income well above 1 million EUR. Below the 698,000 EUR break-even, the 300,000 EUR flat tax costs more than ordinary Italian progressive rates on the same income. For potential applicants below this threshold, the 7% southern Italy programme may be the more appropriate option -- if geographic and lifestyle constraints allow for a qualifying municipality.
Who It Suits
The Article 24-bis regime suits American buyers with substantial foreign income who want to establish Italian residency in a major city or premium property market not covered by the 7% programme's southern municipality constraint. The typical profile: annual foreign income of 1.5M EUR or more, a preference for Milan, Lake Como, Tuscany, Rome, or Florence as a base, and a long-term residency intention of 15 years or more.
It does not suit American retirees with Social Security and IRA income below 700,000 USD per year -- for that profile, the 7% southern municipality programme is structurally superior. The two programmes are complementary at different income levels, not competing at the same level.
How It Compares to the 7% Programme
| Feature | 7% Programme | Article 24-bis (2026) |
|---|---|---|
| Rate / charge | 7% of all foreign income | 300,000 EUR fixed per year (new applicants) |
| Duration | 10 years maximum | 15 years |
| Geographic constraint | Under-20,000 population municipalities in 8 southern regions only | Nationwide -- no constraint |
| Break-even income | Any level -- 7% always applies | ~698,000 EUR foreign income/year |
| Family inclusion | 1,500 EUR/year per additional member | 50,000 EUR/year per additional family member |
| Best suited for | Retirees, moderate income, southern lifestyle | Finance professionals, UHNW, major city residence |
Qualifying Conditions
The regime is available to individuals who have not been Italian tax residents for at least nine of the ten tax years immediately preceding the year of the election. There are no nationality restrictions -- Americans qualify on the same basis as any other non-Italian resident. The individual must genuinely transfer their Italian tax residence: register with the local anagrafe (population registry) and spend the majority of the calendar year in Italy (more than 183 days).
The Italian Revenue Agency (Agenzia delle Entrate) has increased scrutiny of flat-tax elections where demonstrable physical presence is not consistent with the residency claim. A Milan apartment and a genuine working presence in the city satisfies this. A nominally registered address while spending 300 days per year in London or New York does not, and risks both the election being challenged and back-taxes being assessed.
What the Flat Tax Covers and Does Not Cover
The 300,000 EUR annual substitute tax covers all income produced outside Italy. This includes: dividends from foreign companies, interest from foreign bank accounts, capital gains from the sale of foreign securities or assets, carry distributions from foreign-domiciled funds, and rental income from properties outside Italy.
It does not cover Italian-sourced income, which is taxed at ordinary Italian progressive rates regardless of the flat tax election. Italian-sourced income includes: salary paid by an Italian employer, Italian rental income, capital gains from the sale of Italian real estate or Italian securities, and interest from Italian bank accounts. For buyers who will have Italian rental income from their property purchase, the ordinary Italian rates apply to that income stream.
Additional Family Members
Qualifying family members can join the Article 24-bis regime for 50,000 EUR per person per year under the 2026 rate (increased from 25,000 EUR per person under the previous structure). A couple where both spouses have qualifying foreign income would pay 350,000 EUR per year in total (300,000 + 50,000). For families with consolidated foreign income of 2 million EUR or more, this remains highly competitive against ordinary taxation in most EU member states.
Grandfathering applies to the family member surcharge as well: those who enrolled family members under the prior rate structure retain the 25,000 EUR per person rate for the duration of their regime.
Residency Requirement in Practice
The election requires genuine Italian tax residency -- anagrafe registration at a specific Italian address and spending more than 183 days per year in Italy, or having Italy as the demonstrable centre of life and economic interests. The Italian Revenue Agency has materially increased scrutiny of flat-tax elections in recent years. A qualified Italian commercialista should advise specifically on the physical presence documentation requirements before the election is filed.
US Tax Interaction
The United States taxes its citizens on worldwide income regardless of foreign residency status or foreign tax elections. Moving to Italy and electing the Article 24-bis regime does not eliminate or reduce US federal income tax obligations on the same income.
The 300,000 EUR paid annually to Italy may qualify for the US Foreign Tax Credit on Form 1116, potentially reducing the US tax liability on the same foreign income by the amount of creditable Italian tax paid. However, the interaction between the fixed-charge Italian flat tax and the income-proportional US credit mechanism is complex and requires specific modelling for each taxpayer's situation. The excess credit position, the passive versus general basket allocation, and the interaction with US AMT are all material considerations.
FBAR (FinCEN Form 114) reporting applies to Italian bank accounts where the aggregate balance exceeds 10,000 USD at any point in the year. FATCA reporting (Form 8938) applies to foreign financial assets above specified thresholds. These obligations exist regardless of Italian flat tax elections.
Evaluating the flat tax for your income profile? Peter can arrange introductions to vetted Italian commercialisti and US tax attorneys with Article 24-bis track records. Submit an inquiry or reach Peter at petertumbas@bhhsne.com or 412.225.0598.
Frequently Asked Questions
How much is Italy's flat tax for new residents in 2026?
300,000 EUR per year on all foreign-sourced income for individuals transferring Italian tax residence from 2026 onward. 50,000 EUR per qualifying family member per year. 15 years. Applies nationwide.
What is the break-even income for the new flat tax rate?
Approximately 698,000 EUR in annual foreign income. Below this level, the 300,000 EUR flat tax costs more than ordinary Italian progressive rates on the same income. Above it, the flat tax is cheaper.
Does grandfathering still apply after the 2026 increase?
Yes. Italy confirmed grandfathering in the 2026 Budget Law as it did in the 2024 reform. Prior residents retain their entry rate for the full 15-year window: 100,000 EUR if pre-2024, 200,000 EUR if between 2024 and the 2026 law.
Is the flat tax available in Milan, Rome, and Florence?
Yes. The Article 24-bis regime has no geographic constraint. It applies nationwide, unlike the 7% programme which is restricted to qualifying southern municipalities.
What income does the flat tax cover?
All foreign-sourced income: dividends, interest, capital gains, carry distributions, and foreign rental income. Italian-sourced income is taxed at ordinary Italian rates regardless of the flat tax election.
How does the flat tax interact with US tax for Americans?
The US taxes American citizens on worldwide income regardless of Italian elections. The 300,000 EUR Italian payment may qualify for the US Foreign Tax Credit, but the interaction is complex and requires a US tax attorney with international experience to model. FBAR and FATCA reporting obligations exist regardless of Italian elections.