Italy flat tax regime – introduction
On August 7, Italy’s government announced a significant update to its “flat tax” regime, doubling the annual tax cap to €200,000 ($218,220) for income earned abroad by wealthy individuals who relocate their tax residency to Italy.
This measure, originally introduced by a centre-left government in 2017, aims to attract affluent individuals to bolster Italy’s economy.
Victim of its own success?
The scheme, which has already led to 1,186 relocations according to Economy Minister Giancarlo Giorgetti, comes under increased scrutiny following the UK’s decision to abolish its long-standing “non-domiciled” tax regime by April 2025.
Giorgetti highlighted Italy’s opposition to the global trend of countries competing to offer favourable tax conditions to the wealthy, stating:
“We’re against turning our nation into a tax haven for individuals or companies. With Italy’s limited fiscal capabilities, we cannot win such a competition.”
Italy’s revised tax regime could become an attractive option for high-net-worth British residents seeking to maintain lower taxation on offshore income.
While this move could provide a modest boost to Italy’s public finances, particularly as Prime Minister Giorgia Meloni prepares the 2025 budget, it will only apply to new entrants into the scheme, safeguarding those who have already transferred their tax residency to Italy.
The flat tax has previously benefited high-profile individuals like Portuguese football star Cristiano Ronaldo during his tenure at Juventus from 2018 to 2021.
Italy’s audit court estimates that the scheme generated €254 million in tax revenue between 2018 and 2022.
Criticism of flat tax regime
However, the European Union has criticised such regimes, calling them unfair and harmful to state finances.
The EU’s Tax Observatory, in its Global Tax Evasion Report, specifically pointed out that the high-net-worth individual regimes in Italy and Greece offer large exemptions to extremely wealthy individuals, which it views as particularly damaging.
Italy’s flat tax regime – conclusion
For more information on Italy’s flat tax regime, please see our earlier article.
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