200k Flat Tax – Which Are the Most Important Things to Know?

The €200,000 flat tax regime is one of the most attractive incentives for wealthy individuals and families considering relocation to Italy. Known internationally as the Italian flat tax for new residents, it provides certainty, simplicity, and significant tax advantages. But how exactly does it work, and what are the most important things to know before applying? This guide explains the key features, benefits, and potential risks of the flat tax regime, helping you assess whether it might be the right choice for your move to Italy.

What is the €200,000 flat tax regime?

Introduced in 2017 (Article 24-bis of the Italian Income Tax Code), the regime allows eligible individuals to pay a fixed substitute tax of €200,000 per year on all foreign-sourced income.

Instead of being taxed progressively up to 43%, foreign income is covered by this lump-sum payment, regardless of the amount earned. The regime can last up to 15 years, offering predictability and stability for long-term planning.

Family members can also join by paying an additional €25,000 per year.

Who is eligible?

To qualify for the flat tax regime, you must:

Become an Italian tax resident (generally by spending more than 183 days per year in Italy and registering with the local municipality).
Not have been a tax resident in Italy for at least 9 of the previous 10 years.
Opt for the regime in your first Italian tax return, or request an advance ruling (interpello) from the Italian Revenue Agency to confirm eligibility.

The regime is completely optional: you can choose it, or you can remain under ordinary taxation.

What does the 200k flat tax cover?

The €200,000 flat tax covers:

Foreign-sourced income such as dividends, interest, capital gains, rental income, and foreign pensions.
Foreign assets: exemption from IVIE (tax on foreign real estate) and IVAFE (tax on foreign financial assets).
Inheritance and gift taxes: exemption on foreign assets during the regime.

Important: Italian-source income is not covered. For example, employment income from an Italian company or rental income from Italian real estate will be taxed at ordinary progressive rates.

Duration and stability

The regime can last up to 15 years. However, once you exit—whether voluntarily or due to non-compliance—you cannot re-enter. This makes timing and long-term planning essential.

Benefits of the 200k flat tax

Certainty and simplicity: one fixed annual payment covers all foreign income.
Attractive for high earners: the higher your foreign income, the greater the savings compared to ordinary taxation.
Estate planning advantages: foreign assets are excluded from Italian inheritance and gift tax.
Family extension: family members can be included for €25,000 each.
Predictability: unlike ordinary taxation, you know your liability in advance every year.

Potential drawbacks and risks

Not always beneficial: if your foreign income is modest, €200,000 might be more than you would pay under ordinary taxation.
Italian income remains taxable: business income or property rentals in Italy are taxed at standard progressive rates.
Irrevocability: once you leave the regime, you cannot return.
Timing issues: moving before or after mid-year can affect residency and tax exposure.
Complex structures: trusts, holding companies, or investment vehicles may require careful review to ensure compliance.

How to apply for the 200k flat tax

Establish tax residency in Italy, registering with your chosen municipality.
File your first Italian tax return and exercise the option for the flat tax.
Alternatively, file a tax ruling (interpello) before relocating to obtain certainty of eligibility.
Pay the substitute tax (€200,000) annually within standard Italian deadlines.

Common mistakes to avoid

Assuming eligibility without verifying previous residency status.
Underestimating the effect of Italian-sourced income, which is taxed separately.
Missing payment deadlines, which causes immediate and permanent loss of the regime.
Failing to plan for the post-regime period after 15 years.
Overlooking the treatment of foreign entities and structures that might attract additional scrutiny.

Example of tax savings

Consider a wealthy individual with €5 million of annual foreign investment income. Under ordinary Italian taxation, they could face more than €2 million in tax. Under the flat tax regime, their liability is capped at €200,000 per year.

Over a 10-year period, this translates into substantial savings, while ensuring compliance and peace of mind.

FAQs on the 200k Flat Tax Regime

Is the €200,000 flat tax mandatory?
No. It is optional. Eligible individuals can choose between this regime and ordinary taxation.

Does it cover all types of income?
It covers foreign-sourced income only. Italian-sourced income is taxed under the ordinary rules.

What happens if I miss the payment?
If you fail to pay on time, you automatically lose the regime and cannot re-enter.

Do I need to declare my foreign assets?
No. One of the advantages of the regime is exemption from reporting obligations such as IVIE and IVAFE.

Does it apply to inheritance and gift taxes?
Yes, for foreign assets only. Italian inheritance and gift tax still applies to Italian assets.

Can I add family members later?
Yes, family members can join after the initial application, each paying €25,000 per year.

What happens after 15 years?
The regime ends, and you switch to ordinary taxation with progressive rates and full reporting obligations.

Is it better to file a ruling first?
A ruling is not mandatory, but it provides certainty on eligibility before relocating.

Can I exit early?
Yes, but once you exit you cannot opt back in.

What if my income is lower than €200,000 tax would cover?
In that case, the regime may not be beneficial. Careful calculation is essential before choosing.

Does the flat tax cover capital gains from selling foreign companies or investments?
Yes, provided they are considered foreign-source income. Each case requires proper review.

Can heirs continue the regime after my death?
No, the regime ends with the taxpayer. Heirs must evaluate their own tax position separately.

For a complete list of client questions and detailed answers, see our dedicated Q&A on the Italian Flat Tax Regime.

Conclusion: Is the 200k flat tax right for you?

The Italian 200k flat tax regime is a powerful tool for high-net-worth individuals relocating to Italy. It provides certainty, simplicity, and potentially massive savings on foreign income.

However, it is not suitable for everyone. Success depends on your income level, your global asset structure, and your long-term relocation plans. Professional guidance is essential to avoid pitfalls and maximize the benefits.

👉 Contact Move to Dolce Vita today to receive a tailored analysis and determine whether the 200k flat tax is the best solution for your relocation to Italy.

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