The optional regime for new tax residents, also referred to as the res-non-dom regime, Italian flat tax, or residence for tax purposes, permits, subject to statutory conditions, the replacement of Italian personal income tax (IRPEF) on foreign-source income with an annual substitute flat tax of €300,000 (plus €50,000 for each included family member) for a maximum of fifteen tax periods.

Italian-source income remains taxable under the ordinary IRPEF rules. The general statutory condition is non-residence for Italian tax purposes in at least nine of the ten tax periods preceding the transfer of residence. Authorities: Article 24-bis of the TUIR, Italian Revenue Agency (Agenzia delle Entrate) Measure of 8 March 2017, and Circular 17/E of 23 May 2017 (Part III).

Territorial nexus (source of income)

The territorial qualification of income is determined by applying Article 165 TUIR read in parallel with Article 23 TUIR. Income not regarded as produced in Italy is foreign-source and, where a valid election is in force, falls within the substitute flat tax. Typical categories (where of genuine foreign source) include: interest, dividends, royalties, licence fees, rental income from foreign real estate, and gains/losses on foreign financial instruments. Circular 17/E sets out both the objective scope and the treatment of employment income arising from work performed abroad.

Duration and “cherry-picking”.

The election may apply for up to fifteen years (as provided by law). The legislation does not provide for automatic exclusions by jurisdiction: it is the taxpayer who, by exercising the option, can exclude one or more countries/territories (so-called cherry picking). In this case, all income generated in the excluded countries remains subject to ordinary taxation (with possible foreign tax credit) and the RW/IVIE/IVAFE obligations on assets held there return.

For each tax period during which the regime is effective, the law provides: an exemption from foreign asset reporting (Form RW) and from IVIE/IVAFE (wealth taxes on foreign real estate and financial assets) in respect of assets within scope. In addition, for inheritance and gift tax purposes, tax is levied only on assets and rights located in Italy

Exclusions criteria

Italian-source income:

Income produced in Italy is always outside the substitute regime and therefore remains subject to ordinary IRPEF, for example, income from Italian real estate (rents and capital gains) and employment or self-employment income derived from work performed in Italy.

Capital gains on qualifying shareholdings within the first five years:

Capital gains on qualifying participations in foreign entities, realised within the first five tax periods for which the election is valid, do not fall under the flat tax and remain subject to the ordinary regime.

Non-cumulability with other “inbound” regimes:

Circular 17/E reaffirms the alternativity with the inbound workers (impatriati) regime. Recent practice confirms that, where conditions are met, alternating use in different years is possible (see Ruling 159/2024) and addresses the consequences for RW/IVIE/IVAFE upon transitioning from non-dom to impatriati (and vice versa).

Real estate: foreign vs Italian

Foreign real estate

Foreign real estate. Rental income and capital gains relating to properties situated abroad generally fall within the substitute flat tax as foreign-source income. While the regime applies, the RW/IVIE exemptions also apply to those assets.

Italian real estate

Income from properties located in Italy is always outside the substitute regime; accordingly, ordinary IRPEF applies (or cedolare secca, where available), including any special rules for short-term lets.

Stock options and equity instruments

It is essential to distinguish both the nature and the source of the income.

Awards/vesting treated as employment income. Where such components are attributable to employment performed abroad, or otherwise qualify as foreign-source under the territoriality criteria, they may fall within the substitute flat tax as foreign-source employment income (not capital gains). Ruling 83/2022 sets out operational guidance: consistent criteria for apportioning days over the restricted/vesting period, robust supporting documentation, and the possibility for the withholding agent (employer) not to apply withholding on the foreign-source portion once the election is effective (subject to evidence of the election and of the annual flat-tax payments).

Capital gains and qualifying participations (five-year rule)

Qualifying gains realised within the first five years of the election are excluded from the substitute regime and revert to ordinary taxation.

Inclusion of family members, making the election, payment and forfeiture

The regime may be extended to family members as defined in Article 433 of the Italian Civil Code, with an additional €50,000 per person; the “nine out of ten years” condition must be verified separately for each family member in the year of extension.

The election is made by completing Form NR in the Italian personal tax return (Modello Redditi PF) (an advance ruling is optional for complex cases; administrative practice sets out timing and channels). Failure to pay, even partially, the flat tax in a single instalment by the balance due date results in forfeiture of the regime.

Update on the flat-tax amount

For elections made after 10 August 2024, the annual flat tax has been increased to €300,000 (with €50,000 confirmed for each included family member) by Decree-Law 113/2024, subsequently converted into Law 143/2024.

Operational checklist

  • Reconstruct prior tax residence. Prepare a precise reconstruction of tax residence for the last ten tax periods and confirm non-residence in Italy for at least nine of them. Pay particular attention to split-year situations and, where relevant, statutory presumptions relating to certain jurisdictions, the burden of rebuttal rests with the taxpayer.
  • Analytical mapping of income by source. For each income stream, determine the source by applying Articles 165 and 23 TUIR. Prepare a territoriality memorandum setting out the rationale for foreign or Italian source, with cross-references to any applicable double tax treaties (including tie-breaker tests and Article 23 equivalents).
  • Qualifying participations and five-year planning. Identify qualifying shareholdings and schedule any potential disposals. During the first five years, qualifying capital gains are outside the flat tax; therefore, plan timing carefully and consider whether jurisdictional exclusions (“cherry-picking”) are appropriate.
  • Real estate: Italian vs foreign. Segregate Italian properties (ordinary IRPEF/cedolare secca) from foreign properties (substitute tax plus RW/IVIE/IVAFE exemptions while in force). Review lease contracts, historic cost bases, and potential future disposals. On exiting the regime, re-establish the correct foreign-asset reporting.
  • Equity plans and stock options. Collect complete grant and vesting documentation, group policies, and award statements. Define objective, consistent day-count criteria (Italy/abroad) for the restricted/vesting period; instruct the withholding agent regarding non-withholding on the foreign-source portion once the election is effective, supported by travel evidence, global-role schedules, and certifications.
  • Coordination with other reliefs. Confirm alternativity vis-à-vis the inbound workers (impatriati) regime; where appropriate, plan year-by-year switching and manage consequences for RW/IVIE/IVAFE when entering or exiting Article 24-bis.
  • Formalities, family extensions, and payment. Prepare Form NR, assess any family extensions (testing the nine-out-of-ten condition per person and budgeting €25,000 each), and schedule the single payment by the balance deadline. Establish internal procedures to address forfeiture or revocation scenarios.

Article 24-bis TUIR is a powerful instrument of personal tax planning for individuals relocating to Italy, but it demands meticulous documentation and governance. The territoriality of income, participations (with particular attention to the five-year window), real estate, and equity plans are the key technical areas to manage, together with coordination with the inbound workers regime and the formal compliance (Form NR, payments, and RW/IVIE/IVAFE exemptions).

Article updated to January 2026

Avv. Fabio Ciani

Tax Barrister and Supreme Court Counsel | Ciani Partners – Tax Law Firm | Milan

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