Overview of the Flat Tax Regime

Italy’s flat tax regime, introduced by Article 24-bis of the Income Tax Code and updated in 2024, allows qualifying individuals to pay a fixed €200,000 annual tax on all foreign-sourced income. An additional €25,000 per year applies to each family member included in the regime. The regime is valid for up to 15 years.

Eligible income includes dividends, capital gains, interest, rental income, foreign pensions, and trust distributions.

Flat tax regime participants benefit from:

  • No reporting of foreign assets (no RW section in the tax return)
  • No wealth taxes (IVIE and IVAFE) on foreign assets
  • No CFC (Controlled Foreign Corporation) rules
  • No inheritance or gift tax on the transfer of foreign assets
  • The option to exclude specific countries from the flat tax and apply standard taxation for those jurisdictions

Tax-Free Wealth Transfers Under Circular No. 17/E

One of the most strategic features of the flat tax regime is the full exemption from Italian gift and inheritance tax on foreign assets, as clarified by the Italian Revenue Agency in Circular 17/E of May 23, 2017.

Foreign-source assets transferred by a flat tax resident, whether during their lifetime (gifts) or upon death (inheritance), are entirely excluded from the scope of Italian succession or donation taxes.

The exemption applies to:

  • Foreign real estate and financial assets
  • Offshore bank accounts and investment portfolios
  • Trusts and foundations governed by foreign law
  • Foreign shares and participations
  • Life insurance and other financial instruments held abroad

The tax exemption applies regardless of the residence of the heirs or beneficiaries.

Why This Matters for Succession Planning

High-net-worth individuals with foreign assets often face significant succession and wealth transfer taxes in their home jurisdictions or future country of residence. Italy, through this regime, creates a clear legal path to transfer wealth without tax erosion, provided the assets remain abroad and the taxpayer remains under the flat tax regime at the time of transfer.

This creates opportunities for:

  • Inter vivos gifts of foreign real estate or shares
  • Gifting of trust interests to next-generation family members
  • Testamentary planning involving cross-border portfolios
  • Efficient use of holding companies, family foundations, and insurance wrappers

What Counts as “Foreign”?

For tax purposes, “foreign” refers to the location of the asset, not necessarily the legal residence of the individual. Assets are considered foreign when:

  • Held through non-Italian bank accounts or investment institutions
  • Located outside Italian territory
  • Governed by foreign legal systems (e.g., a trust established in Jersey or Liechtenstein)
  • Not linked to Italy through a domestic company, intermediary, or fiscal wrapper

Caution is advised when dealing with assets held via Italian banks or through mixed structures, as they may fall outside this exemption.

Timing and Strategic Considerations

To benefit from the wealth transfer exemption, the individual must be under the flat tax regime at the time of the transfer. This means both lifetime gifts and succession events must take place within the 15-year duration of the regime.

Because timing is essential, many families use the early years of the regime to:

  • Transfer wealth gradually to heirs
  • Restructure trusts or holding vehicles
  • Create multi-generational estate planning models
  • Prepare testamentary instruments under Italian or foreign law

Advance planning is key to maximizing the regime’s benefits.

Practical Example

A Canadian family relocates to Italy under the flat tax. The family patriarch owns €8 million in foreign-held investments via a Luxembourg holding company. During year 5 of the regime, he gifts €1.5 million in shares to each of his adult children residing in the U.S. and France. The transaction is entirely exempt from Italian gift tax, and no reporting obligation arises in Italy.

According to Circular 17/E, this is fully compliant with current law, and the exemption applies even when beneficiaries are not Italian residents.

Why an Interpello May Help

While not required, filing an advance tax ruling (interpello) is highly recommended when:

  • The asset structure is complex
  • Trusts or offshore companies are involved
  • Previous residency in Italy or tax ties need clarification
  • You are planning large gifts or inheritance scenarios soon after relocating

An interpello confirms your eligibility for the flat tax and the correct interpretation of the gift/inheritance exemption for your case. It also protects you against future disputes.

How Move to Dolce Vita Can Support You

At Move to Dolce Vita, we combine tax legal expertise with practical relocation experience. We assist clients worldwide in applying for the flat tax regime and using it for effective estate planning. Our founder, Marco Mesina, is an Italian tax attorney with a background in cross-border wealth planning and pre-immigration structuring.

Our services include:

  • Full flat tax eligibility analysis
  • Drafting and submission of tax rulings
  • Trust and asset structure review
  • Planning for intergenerational wealth transfers
  • Legal and immigration assistance throughout your move

Plan Your Legacy the Smart Way

Italy is offering more than just tax advantages—it’s offering a legal framework for preserving family wealth across generations.

If you’re relocating with global assets, the flat tax regime may be the most strategic tool available in Europe today.

Contact us to design your tax and succession plan, fully optimized under Italy’s most powerful regime for high-net-worth individuals.

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