How the Flat Tax Regime Works

Under Article 24-bis of the Italian Income Tax Code:

  • New residents (not tax resident in 9 of the previous 10 years)
  • Can opt to pay a fixed €200,000 annually on all foreign income
  • Can add eligible family members (e.g., spouse, adult child) for an extra €25,000 each
  • Valid for up to 15 years
  • Exempts from:
    • Reporting foreign assets (no RW section)
    • IVIE (real estate tax) and IVAFE (financial assets tax)
    • CFC rules
    • Inheritance and gift tax on foreign assets

But the regime does not cover income sourced from Italy (e.g. working in Italy, Italian real estate).

How Ordinary Taxation Works in Italy

Italy’s tax system includes:

  • Progressive IRPEF rates:
    • 23% on income up to €15,000
    • 25% from €15,001–€28,000
    • 35% from €28,001–€50,000
    • 43% above €50,000
  • Regional and municipal surcharges (up to 3%)
  • Flat 26% tax on passive income (dividends, interest, capital gains)
  • IVIE tax: 1.06% on foreign real estate‍
  • IVAFE tax: 0.2% on foreign financial assets
  • Full RW reporting of foreign accounts, shares, trusts, etc.

Scenario 1: Single Applicant with High Foreign Income

Flat Tax

  • Foreign income: €1,200,000
  • Fixed tax: €200,000
  • No reporting, no wealth tax, no inheritance tax

Ordinary Taxation

  • IRPEF on €1.2M = approx. €505,000
  • IVAFE on €5M in investments = €10,000
  • IVIE on €10M UK property = €106,000
  • Total: €621,000+

Conclusion:
➡ Flat tax saves over €400,000 per year
➡ Break-even point = approx. €450k–500k in taxable foreign income
➡ If you own non-EU real estate, even with lower income, flat tax becomes attractive

Scenario 2: Married Couple, Both With Foreign Income

Flat Tax

  • Husband: foreign income €700,000
  • Wife: foreign income €400,000
  • Total flat tax: €200,000 + €25,000 = €225,000

Ordinary Taxation

  • Joint IRPEF: approx. €400,000–420,000
  • IVAFE on €6M joint portfolio = €12,000
  • IVIE on €10M UK property = €106,000
  • Total: €530,000+

Conclusion:
➡ Flat tax offers savings of over €300,000
➡ Particularly useful when both spouses have foreign income or jointly hold large foreign assets

Passive Income and the 26% Tax Issue

In the ordinary regime:

  • Dividends, interest, and capital gains are taxed at 26% flat rate
  • If you earn €500,000 in passive income, that’s €130,000 in tax
  • With IVAFE + RW reporting + legal compliance = real burden rises

Under the flat tax:

  • Entire passive income covered under €200k
  • No declaration or separate taxation
  • Planning certainty if you have:
    • Significant dividend flows
    • A trust distributing capital gains
    • Liquidity events in foreign structures

Conclusion: If your foreign income is mostly passive, the flat tax removes both tax and complexity.

Real Estate Abroad: IVIE and Compliance Costs

Let’s say you own the following:

  • Property in London, valued at €10 million
  • Rental income of €100,000 per year

Ordinary Regime:

  • IVIE at 1.06% = €106,000 per year
  • IRPEF on rental income ≈ €43,000
  • Rental income also triggers RW reporting and possible audit risk

Flat Tax Regime:

  • Property and income both covered by €200k
  • No IVIE
  • No income declaration
  • Total cost: €200k

Break-even analysis:

  • The IVIE alone almost matches the flat tax
  • Add passive income and capital gains, and the flat tax becomes significantly more efficient

When Is the Flat Tax NOT Convenient?

  • Your foreign income is under €300k, and you hold no high-value foreign assets
  • Your spouse does not earn, and you don’t include them (€25k wasted)
  • You are eligible for the inbound workers regime (50–60% exemption) and have Italian-source income
  • You’re invested in tax-advantaged instruments
  • You are not interested in full tax certainty or compliance simplicity

Planning Strategy: Optimize Income Source

To benefit from the flat tax:

  • Keep most of your income foreign-sourced
  • Avoid earning in Italy unless absolutely necessary
  • Use holding companies or trusts to accumulate income abroad
  • Plan liquidity events (exit, dividends, redemptions) after relocating and electing the flat tax

Summary: When Is the Flat Tax Worth It?

✅ You earn more than €500,000 in foreign income
✅ You own foreign real estate, especially in non-EU countries
✅ You receive large amounts of dividends or capital gains
✅ You are relocating with a spouse or adult children
✅ You want fixed tax cost, no compliance risks, and zero reporting

How Move to Dolce Vita Can Help

At Move to Dolce Vita, we provide:

  • Pre-relocation tax simulations (flat tax vs IRPEF)
  • Strategic asset analysis: when to sell, where to earn, how to plan
  • Advanced tax ruling preparation and filing
  • Italian tax return filing and €200k flat tax election
  • Ongoing legal and tax assistance for HNWIs in Italy
  • Planning for families and long-term structures

Led by tax attorney Marco Mesina, we bring clarity to your move—so your Italian dream comes with tax peace of mind.

Ready to Find Out If the Flat Tax Works for You?

Contact us for a tailored simulation and see how much you can save.

Your assets deserve efficiency. Your life deserves Italy.
Move smart. Move to Dolce Vita.

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