Italy’s government is preparing to tighten one of its most high-profile tax incentives for the wealthy, signalling a shift in tone from open-armed attraction to cautious recalibration. Under its 2026 draft budget, Rome plans to raise the annual flat tax applied to rich foreign residents and returning Italians from €200,000 to €300,000 — a 50 per cent increase on the amount paid in lieu of normal income tax on foreign-sourced income. The change marks a delicate balance between preserving Italy’s reputation as a haven for mobile wealth and responding to growing fiscal and political pressure at home.
The flat-tax regime was introduced in 2017 to entice high-net-worth individuals, expatriate professionals and family offices to relocate to Italy. Participants pay a single annual levy on their global income for up to 15 years, replacing progressive income taxation and exempting them from inheritance tax on assets held abroad. The policy quickly drew interest from wealthy financiers, entrepreneurs and celebrities, particularly in Milan, whose luxury property market boomed on the back of new arrivals.
But nearly a decade later, the economic and political climate looks very different. Italy’s public debt remains among the highest in the eurozone, its growth sluggish, and its fiscal space constrained. The government is under pressure to generate new revenue to fund social-spending commitments while keeping its budget deficit within EU limits. Raising the flat tax for rich foreigners is therefore as much about optics as it is about fiscal arithmetic — a signal that the wealthy must contribute more at a time when ordinary Italians are grappling with high living costs and stagnant wages.
Prime Minister Giorgia Meloni’s administration insists the move is not designed to dismantle the regime but to “modernise” it. The new rate, set at €300,000, will still make Italy one of the more generous jurisdictions in Europe for high-net-worth newcomers, even as similar programmes elsewhere are being scaled back or scrapped. The United Kingdom’s abolition of its non-dom tax status has already made Italy comparatively attractive, and officials believe the increase will not meaningfully dampen interest from global elites.
Still, the government’s decision reflects a recognition that the political environment has changed. The programme, once heralded as a tool to reverse Italy’s brain drain and stimulate investment, has increasingly become a lightning rod for criticism. In Milan and parts of Tuscany, residents complain that the influx of ultra-rich foreigners has driven up property prices and deepened inequality. Local opposition politicians have branded the regime “a tax holiday for billionaires” at odds with the economic realities facing younger Italians shut out of the housing market.
For the wealthy beneficiaries, the rise is unlikely to be prohibitive. For many, €300,000 represents a fraction of what they would otherwise owe under Italy’s standard tax rates, which can exceed 40 per cent on higher incomes. Tax advisers note that clients drawn to the scheme value the simplicity and predictability of the flat-tax model as much as its generosity. Moreover, lifestyle factors — Italy’s climate, culture, and relative stability — often outweigh financial considerations. A larger annual bill is unlikely to spur an exodus.
The fiscal gains, though modest in macroeconomic terms, are politically significant. Italy’s treasury expects the increase to yield several hundred million euros in additional annual revenue, which will help fund income-tax relief for low- and middle-income workers. Framed this way, the measure allows the government to present itself as both fiscally responsible and socially conscious, asking the wealthy to shoulder a greater share of the burden without alienating them entirely.
There are, however, risks. The flat-tax regime’s success has hinged on predictability — the assurance that Italy would not shift the goalposts abruptly. A 50 per cent increase, while not catastrophic, may prompt some potential applicants to hesitate, fearing further changes down the line. Other jurisdictions, from Portugal to Greece, are competing for the same pool of mobile capital and talent. If confidence in Italy’s policy stability wavers, the flow of newcomers could slow, undercutting the very revenues the government hopes to raise.
Another concern lies in perception. Italy’s wealth-attraction strategy has often been criticised as benefiting a narrow class while doing little to address structural economic weaknesses. Raising the flat tax may ease political pressure temporarily but does not tackle the deeper issues of low productivity, complex bureaucracy and uneven investment that deter broader economic growth. Nor does it address the distortions created in property markets, particularly in Milan, where luxury demand has pushed prices far beyond the reach of local buyers.
Economists point out that the fiscal effect of the flat-tax regime, even at a higher rate, remains marginal relative to Italy’s total debt obligations. With public debt hovering above 140 per cent of GDP, the government’s challenge lies not in extracting a few hundred million euros more from wealthy expatriates but in sustaining credible growth and discipline across the broader tax base. Nonetheless, at a symbolic level, the adjustment may strengthen Italy’s hand in Brussels by demonstrating a willingness to act on fairness and fiscal prudence.
Business groups have largely accepted the increase, viewing it as a manageable compromise. Private-banking executives and tax lawyers say the new rate maintains Italy’s competitive edge while addressing political realities. “It was inevitable,” one Milan-based adviser said. “The government had to show that the wealthy are paying more, but it hasn’t undermined the structure of the regime.”
The broader question is whether this marks the beginning of a gradual tightening of Italy’s preferential tax schemes. Over the past two years, the Meloni government has also trimmed other incentives, including the “impatriates” regime that offered tax breaks to returning professionals. Some observers believe Rome is moving towards a more European norm, where special regimes are narrower and more targeted, while maintaining selective advantages for strategic sectors such as finance and technology.
The European Commission will be watching closely. While Italy’s flat-tax programme has so far avoided conflict with EU state-aid rules, a more aggressive version could invite scrutiny. The Commission’s growing interest in curbing intra-EU tax competition, combined with political momentum for harmonisation, could limit Italy’s freedom to sweeten its fiscal offers indefinitely.
For now, though, the scheme endures — just more expensive. Wealth managers expect most existing participants to remain, especially if the government offers transitional arrangements or allows current enrollees to continue at the €200,000 rate for the remainder of their 15-year term. The greater uncertainty lies with new applicants, particularly those comparing Italy with alternative jurisdictions offering lower effective tax burdens.
In essence, the government’s move underscores Italy’s uneasy balancing act between fiscal necessity and global competitiveness. The flat-tax regime helped revive interest in Italy as a home for capital and entrepreneurship, but it has also become a symbol of privilege at odds with the country’s egalitarian political instincts. By raising the rate to €300,000, Rome is betting that it can still attract the wealthy while appeasing domestic discontent — a gamble that reflects both pragmatism and pressure.
Whether this recalibration succeeds will depend on more than the headline figure. Italy’s broader economic environment — its bureaucracy, infrastructure, and growth prospects — will determine whether the super-rich continue to view the country as a destination worth the premium. The flat tax was never just about revenue; it was about confidence in Italy’s stability and openness. The latest increase tests that confidence, but it does not yet break it.
For the world’s wealthy, Italy remains an alluring proposition. For the government, however, the challenge is no longer how to attract them — but how to ensure that their presence benefits the wider economy as much as the tax receipts. In that delicate equation, a €100,000 rise may prove as political as it is economic.
