By Giuseppe Fonte
ROME (Reuters) -Italy plans to raise by 50% the rate of a “flat” tax designed to attract wealthy individuals, as part of measures to fund its 2026-2028 budget plan, two officials close to the matter told Reuters.
The government intends to increase the annual levy to 300,000 euros from 200,000 euros on foreign-sourced income earned by individuals who transfer their tax residence to Italy, the officials said.
The move, included in the draft 2026 budget law, marks the second hike in two years.
First introduced in 2017 by Prime Minister Matteo Renzi’s centre-left government to lure wealthy foreigners, the levy was doubled to 200,000 in 2024 by Prime Minister Giorgia Meloni’s conservative administration, with no retroactive effect.
Despite doubling its flat tax, Italy retained its tax shelter appeal for the ultra-rich due to its very favourable inheritance tax set-up, tax experts told Reuters at the time.
Contributing to inflows into Italy, Britain has scrapped its long-standing tax regime for wealthy foreign residents, which had allowed them to avoid UK tax on overseas income.
Nearly 1,500 individuals took advantage of Italy’s flat tax regime in 2023, according to June data from the Court of Auditors. The measure generated 315 million euros in revenue for the state between 2020 and 2023.
Milan has emerged as a top relocation hub, heating up its housing market and exacerbating a cost-of-living squeeze in Italy’s financial capital.
Similar tax incentives exist across Europe.
Greece levies a flat 100,000 euro annual tax on overseas income for qualifying foreign residents, provided they invest at least 500,000 euros in the country.
Portugal offers a 20% flat tax on Portuguese-sourced income and exemptions on certain foreign income for highly qualified professionals in science, innovation, education.
By contrast, has Spain introduced a temporary “solidarity tax on large fortunes,” targeting net wealth above 3 million euros with progressive rates up to 3.5%.
In September, then-French Prime Minister François Bayrou accused Italy of engaging in “fiscal dumping” through its flat tax regime, a claim Italian Premier Giorgia Meloni dismissed as “utterly baseless”. ($1 = 0.8548 euros)
(Reporting by Giuseppe Fonte; Writing by Giulia Segreti; Editing by Valentina Za)
