• Italy proposes increasing its flat tax on foreign income for wealthy newcomers from €200,000 to €300,000 annually.
  • The move would mark the second major hike in two years, potentially cooling Milan's appeal to global elites.
  • The policy shift reflects a broader European trend of scaling back tax incentives for high-net-worth individuals.

Italy's government is preparing to significantly increase the cost for wealthy foreigners seeking its favorable tax regime, with a new proposal that would raise the flat tax on foreign-sourced income by 50% to €300,000 per year. The measure, if approved, would take effect for new applicants and represents the latest effort to balance attracting mobile capital with addressing domestic concerns about tax equity.

The planned increase comes just one year after the flat tax was doubled from €100,000 to €200,000 for 2025 under Law Decree No. 113 of August 2024. According to people familiar with the matter, the further hike to €300,000 is being discussed as part of broader fiscal reforms aimed at closing budget gaps while maintaining Italy's competitive position relative to other European jurisdictions.

"This would fundamentally change the calculus for many wealthy individuals considering Italy," said a Milan-based tax advisor who requested anonymity because the discussions are private. "At €200,000, Italy remained compelling compared to alternatives. At €300,000, we're likely to see some prospective residents reconsider their options."

The special regime, introduced in 2017, allows individuals who haven't been Italian tax residents for at least nine of the previous ten years to pay a flat annual fee on all foreign-sourced income instead of progressive income taxes. The arrangement extends to family members for an additional €25,000 each and can be maintained for up to 15 years.

Italy's appeal to global high-net-worth individuals has surged in recent years, particularly as the UK abolished its non-dom regime effective April 2025 and Portugal scaled back its Non-Habitual Residency program. Milan has emerged as a particular beneficiary, attracting wealthy expats drawn to its luxury real estate, cultural offerings, and favorable tax treatment.

A government official familiar with the discussions confirmed that the proposal is under serious consideration but noted that "the final figure may be subject to negotiation" during budget discussions. The official declined to specify when the new rate might take effect if approved.

Efforts to reach representatives from Italy's finance ministry for comment were unsuccessful Thursday evening.

The potential tax hike reflects growing political pressure to address perceptions that Italy has been overly generous to wealthy foreigners while middle-class Italians face higher tax burdens. Similar debates have played out in the UK and Portugal, where generous expat tax regimes became politically controversial before being partially reversed.

Real estate professionals in Milan's luxury market are watching developments closely. "We've seen tremendous interest from international buyers taking advantage of the current regime," said a senior broker at a premier Milan real estate firm. "A significant increase would inevitably cool some of that demand, particularly from those for whom the tax savings were the primary motivation."

Correction: An earlier version of this article stated the current flat tax rate was €100,000. The rate was increased to €200,000 for 2025 under Law Decree No. 113 of August 2024.