Italy is undergoing a sweeping multi-year tax reform that directly impacts both prospective new residents and expats already living in the country. As we approach 2026, understanding these upcoming changes is crucial for anyone considering paying taxes in Italy, especially foreign nationals and global professionals. This guide offers a clear, practical overview of the main reforms: from stricter individual tax residency rules to the rising cost of Italy’s flat tax regime, modest income tax (IRPEF) reliefs, and the introduction of a new consolidated VAT code.
1. The Broader Reform Context: Law 111/2023 and the 2026 Budget Bill
Italy’s tax policy overhaul flows from the 2023 enabling law for tax reform (Legge Delega Fiscale, Law 111/2023) and the evolving 2026 Budget Law (Legge di Bilancio 2026). As is typical, actual measures are negotiated and finalized during the autumn, with changes coming into effect on 1 January or later as specified. For foreign nationals or expats planning to file Italian taxes online or relocate, it’s vital to track:
- Rules already in force (like new residency criteria since 1 January 2024),
- Measures scheduled for 2026 (such as the consolidated VAT Code),
- Proposals still under debate – especially the further increase of the lump-sum flat tax for new residents and how transitional “grandfathering” rules apply.
Staying informed and planning your timing will help you take advantage of the most favorable regimes.
2. New Tax Residency Criteria for Individuals (In Force Since 2024)
A significant shift for expats and mobile professionals is the updated definition of Italian tax residency, which entered into force from 1 January 2024 and is governed by Legislative Decree 209/2023, with clarifications from Revenue Agency guidance.
2.1. Updated Residency Tests
As of 2024, you are considered tax resident in Italy if, for over 183 days in the tax year (or 184 in leap years), at least one of the following applies:
- You are registered in the register of the resident population (Anagrafe della popolazione residente);
- You have your domicile in Italy, now legally defined as your main center of life for personal and family relationships (not just economic interests);
- You are physically present in Italy for most of the year – even if days are non-consecutive.
2.2. Key Novelties and Practical Impact
- Physical presence alone can trigger residency: If you spend 183+ days in Italy (even without registering), you may be considered tax resident. This especially impacts digital nomads, students, and remote workers staying for extended periods.
- Anagrafe registration is no longer absolute proof: While being registered creates a presumption of Italian tax residency, it is now rebuttable – you can present evidence that your actual center of life is abroad.
- Substance over form: The reform emphasizes where you genuinely live and have personal ties, not just formal registrations.
Impact: Foreigners spending significant time in Italy will find it harder to avoid tax residency, even without formal steps. Conversely, maintaining Anagrafe registration while living truly abroad allows more flexibility, as long as you prepare clear supporting documentation. Special care is needed for anyone accessing the flat tax for new residents or the impatriate regime, as the date you become tax resident now determines your eligibility and grandfathering status.
3. The Lump‑Sum “Flat Tax” for New Residents: Higher Cost from 2026
The lump-sum flat tax regime (regime forfetario per nuovi residenti) lets qualifying individuals pay a fixed annual substitute tax on their foreign-sourced income instead of normal progressive IRPEF rates. A number of major changes are underway:
3.1. How the Regime Works (Up to 2025)
- Eligibility: You must become Italian tax resident and have been non-resident for at least 9 out of the previous 10 years. Open to both foreign nationals and returning Italians.
- Current Rates: Originally €100,000/year for the main applicant, plus €25,000 per family member. As of August 2024, the main lump sum rises to €200,000 for new entrants.
- Usually, there’s no obligation to fill in the quadro RW (foreign asset reporting) related to income covered by the flat tax.
3.2. Planned Increase to €300,000 from 2026
The 2026 Budget Bill proposes:
- Raising the main annual lump-sum from €200,000 to €300,000,
- And family member add-on from €25,000 to €50,000,
- Expected effective date: 1 January 2026 (pending approval).
This change aims to bring the flat tax regime closer to international standards, but may reduce its relative attractiveness versus similar regimes elsewhere in Europe.
3.3. Grandfathering: Three Tiers Based on Date of Residency
- Moved to Italy before 10 August 2024:
Retain the original €100,000 (+ €25,000 per family member) rate for the remainder of the regime. - Moved between 11 August 2024 and 31 December 2025:
Subject to €200,000 (+ €25,000). - Move from 1 January 2026 onward:
Expected to pay €300,000 (+ €50,000 per family member), if approved.
"Residence" in this context means the habitual abode under Article 43 of the Civil Code—closely linked (but distinct) from simply being present on a certain date. The timing and proof of your Italian tax residency can have major consequences for your tax liability over years to come.
Impact: For internationally mobile high-net-worth individuals, moving to Italy before the end of 2025 can lock in significant long-term savings under the more favorable flat tax rates. Afterwards, the cost rises sharply, which may factor into your choice of destination.
4. IRPEF Changes for 2026: Income Tax Relief for Middle Incomes
For foreign employees and expats who are (or become) ordinary Italian tax residents taxed under IRPEF, the 2026 Budget Law includes some modest relief:
- The marginal rate on the €28,001–€50,000 income band is due to drop from 35% to 33% from 2026.
- Other income brackets (23% for lower incomes, 43% for higher) remain unchanged.
This translates to a maximum tax saving of about €440 per year for those with income fully within this bracket.
Impact: While not transformational, this cut offers a small reduction for typical employees and professionals. It does not change the relative appeal of the ordinary system versus special regimes, but every bit helps.
5. New Consolidated VAT Code: Simpler Rules for Entrepreneurs from 2026
If you own or run a business, practice as a freelancer, or plan to provide digital services in Italy, know that a major VAT law overhaul arrives in 2026:
- Years of fragmented VAT legislation will be consolidated into a single, clearer Testo Unico IVA (Unified VAT Code), effective 1 January 2026.
- The new code will mirror the EU VAT Directive, simplifying cross-border reporting and bringing Italian rules in line with EU norms.
- It will fully integrate e-invoicing, mandatory digital reporting, and pre-filled VAT returns into Italian law, alongside formal “place-of-supply” rules for digital/online services.
Impact: Entrepreneurs and freelancers—especially those operating cross-border or offering digital content—will benefit from greater legal clarity, though at the cost of adapting to stricter digital compliance standards.
6. Other Corporate and Structural Measures for Investors
While the focus here is individual taxes, foreign nationals often invest in or control Italian companies. Notable changes in this area include:
- A temporary reduced corporate tax rate (IRES) of 20% (down from 24%) for profits reinvested in qualifying assets for FY 2025.
- Extra deductions for labor costs (hiring or payroll increases), extended through 2027.
- Administrative reforms: enhanced tax control frameworks, cooperative compliance regimes, and streamlined penalty provisions aim to ease business tax administration.
- Special measures for the financial sector may influence where investors and managers choose to base their operations.
Impact: The evolving corporate and business tax environment may make Italy more inviting for real economic activity when combined with individual incentives, particularly for internationally active entrepreneurs ready to invest or hire locally.
7. Practical Implications and Planning Points for Foreign Nationals and Expats
- Residency is easier to trigger: Spending 183+ days in Italy—regardless of Anagrafe registration—may capture you as a tax resident. Track your day-counts and determine where your “center of life” lies.
- Anagrafe registration still matters: It creates a presumption but is no longer conclusive. Always keep supporting evidence of where you live, especially if your circumstances are complex.
- The flat tax is getting more expensive: Moving before the next thresholds (August 2024 and December 2025) can save you hundreds of thousands of euros over time. Plan ahead if you are considering the move.
- Ordinary IRPEF is slightly lighter for middle incomes: The 2% rate cut should offer a modest annual tax saving to many employees and professionals.
- Business reforms are coming: The new VAT code and corporate incentives make Italy more attractive to entrepreneurs and business owners, though may require upgrading compliance systems.
With Italian tax law evolving quickly—and some changes still pending parliamentary approval—it’s critical for foreign nationals and expats to:
- Map out your likely Italian tax residency status under the new rules,
- Decide if and when special regimes (like the flat tax) are favorable and act before key grandfathering deadlines,
- Assess how planned income tax and VAT changes will affect your employment or business income.
Given the complexity and the amount at stake, thoughtful planning is highly recommended. ItalianTaxes.com allows you to file Italian taxes online, track your residency status, and maintain compliance—all through a user-friendly, technology-driven platform built to streamline every step of the process. Sign up today for reliable, paperless, and fully compliant tax filing in Italy—no matter where in the world you’re coming from or what your goals are.
