High-net-worth individuals weighing a move to Italy face a steeper price tag after the 2026 Budget Law, published on 11 February, increased the annual substitute tax under the Lombard-style ‘resident but non-domiciled’ regime from €200,000 to €300,000. The levy for each dependent family member rises from €25,000 to €50,000.
Crucially, the legislation protects taxpayers who established Italian residence before 31 December 2025; they will continue to pay the old €200,000 rate. Lawmakers framed the grandfathering clause as proof of “regime stability,” aiming to calm private-client advisers who warned sudden hikes could undermine investor confidence.
![Budget Law Raises ‘Non-Dom’ Flat Tax to €300,000 but Grandfathers Existing Residents]()
Despite the increase, the flat tax remains a magnet for ultra-wealthy individuals seeking to shield foreign-source income from progressive IRPEF rates that top out at 43 percent. Advisors note that the law still permits a combined use of the flat tax and the impatriate regime, allowing newcomers to shelter offshore income while enjoying a 50 percent reduction on Italian-source earnings for five years.
For global mobility managers, the raised threshold means reassessing cost projections for senior executives and partners relocating to Milan or Rome. Packages negotiated in 2025 should be reviewed to confirm whether employees will qualify for the lower grandfathered rate based on registration dates.
Tax planners predict a short-term surge in residency filings before the 1 January 2026 cut-off, followed by a pause as prospects evaluate the higher price. Long-term, the measure signals Rome’s intention to keep the scheme but shift more fiscal burden onto new entrants, aligning with OECD criticism that ultra-low lump-sum taxes distort competition among EU member states.
Crucially, the legislation protects taxpayers who established Italian residence before 31 December 2025; they will continue to pay the old €200,000 rate. Lawmakers framed the grandfathering clause as proof of “regime stability,” aiming to calm private-client advisers who warned sudden hikes could undermine investor confidence.
Despite the increase, the flat tax remains a magnet for ultra-wealthy individuals seeking to shield foreign-source income from progressive IRPEF rates that top out at 43 percent. Advisors note that the law still permits a combined use of the flat tax and the impatriate regime, allowing newcomers to shelter offshore income while enjoying a 50 percent reduction on Italian-source earnings for five years.
For global mobility managers, the raised threshold means reassessing cost projections for senior executives and partners relocating to Milan or Rome. Packages negotiated in 2025 should be reviewed to confirm whether employees will qualify for the lower grandfathered rate based on registration dates.
Tax planners predict a short-term surge in residency filings before the 1 January 2026 cut-off, followed by a pause as prospects evaluate the higher price. Long-term, the measure signals Rome’s intention to keep the scheme but shift more fiscal burden onto new entrants, aligning with OECD criticism that ultra-low lump-sum taxes distort competition among EU member states.
