The Flat Tax Moved the Income, Not the Law

Italy has raised the price of the same tax regime twice inside eighteen months, and has now moved it to a different address in the statute book.

The substitute tax for individuals transferring their tax residence to Italy was introduced at 100,000 euro a year by the 2017 budget law. Article 2 of Decree-Law No. 113 of 9 August 2024 raised it to 200,000 euro for those transferring residence, for the purposes of article 43 of the Civil Code, after that decree came into force. Article 1, paragraphs 25 and 26, of Law No. 199 of 30 December 2025 raised it again to 300,000 euro, and the amount payable for each family member brought within the option from 25,000 to 50,000 euro, for those transferring residence from the entry into force of that law. Three cohorts now pay three different annual figures for one regime.

The conditions did not move. The applicant must not have been resident in Italy for at least nine of the ten tax periods preceding the option. The option is exercised only after a favourable answer to an advance ruling from the Revenue Agency. It lasts fifteen years at most, ends on non-payment, and the tax is deductible against nothing.

Nor is the regime a quiet arrangement. The option must state the jurisdiction or jurisdictions of the applicant's last tax residence, and the Revenue Agency transmits that information, through the instruments of administrative cooperation, to the tax authorities of those jurisdictions. Electing is an act of disclosure to the country being left.

The address changed, and the text did not

Legislative Decree No. 117 of 19 June 2026, the consolidated act on income taxes, was published in the Official Gazette of 3 July 2026 and came into force on 4 July 2026. It restates the regime at article 246, in the same words and at the same figures, and article 24-bis of the 1986 income tax code is repealed with effect from 1 January 2027.

That is a small thing with a practical edge. From next January a memorandum citing article 24-bis is citing a repealed provision, and a clause in a family document that refers to it by number rather than by substance will need reading twice. Nothing of consequence changed. The citation did.

What a substitute tax actually substitutes

It substitutes personal income tax on foreign-source income. That is all it does.

It does not substitute Italian succession law, Italian control of strategic transactions, or Italian criminal law on reputation. All three arrive with the address, none of them is priced, and each decides more about a family's position than the annual figure does.

The reserved share, and the reform nobody outside Italy noticed

Article 536 of the Civil Code reserves a share of the estate to the spouse, the children and the ascendants. Article 549 forbids the testator to impose burdens or conditions on the share due to those protected heirs. Italy has recognised trusts since the Hague Convention of 1 July 1985 was ratified by Law No. 364 of 16 October 1989 and entered into force for Italy on 1 January 1992, but article 15 of that Convention preserves the mandatory rules designated by the forum's conflict rules, and testamentary reserved shares are named among them. Recognition of a trust has never been immunity from the reserved share, and structures designed under a law that has no such concept meet it on arrival.

What changed is the remedy. Article 44 of Law No. 182 of 2 December 2025, a statute about the simplification and digitalisation of administrative procedures, rewrote articles 561, 562, 563, 2652 and 2690 of the Civil Code with effect from 18 December 2025, applying to successions opened after that date. Reduction of a gift no longer prejudices third parties to whom the donee has sold donated immovables; the donee must instead compensate the protected heirs in money to the extent needed to make up their share. Charges and mortgages granted by the donee over restored property remain effective, with the same monetary compensation. Where the donee is insolvent, a gratuitous transferee compensates within the limit of the benefit received.

The reserved share did not shrink. The claim stopped following the asset and started following the money, and Italian property that came out of a gift became financeable and saleable in a way it had not been. Where a family's Italian real estate arrived by donation, what used to be a title question is now a solvency question. That is a different problem. It is not always a smaller one.

The transaction that has to be notified

Decree-Law No. 21 of 15 March 2012, converted with amendments by Law No. 56 of 11 May 2012, requires notification to the Presidency of the Council of resolutions, acts and transactions concerning strategic assets in energy, transport and communications, among other sectors. Under article 2 the President of the Council communicates any veto within forty-five days of notification. That period is suspended once where information is sought from the company, which must answer within ten days, and once where enquiries are made of third parties, who must answer within twenty. Until notification and the expiry of those periods the effectiveness of the transaction is suspended. Acts adopted or implemented in breach are null, the Government may order restoration of the previous position at the parties' expense, and the administrative penalty reaches twice the value of the transaction and not less than one per cent of the cumulative turnover of the undertakings involved.

The statute also directs that the veto be exercised as specific conditions wherever conditions suffice. A family holding an Italian operating asset therefore acquires a filing duty and a standstill that attach to the asset, not to the owner's tax status, and that are unaffected by any election made under article 246.

Reputation, where the remedy is criminal

Article 595 of the Criminal Code punishes defamation committed by the press or another means of publicity with imprisonment of six months to three years or a fine. In judgment No. 150 of 2021, decided on 22 June and deposited on 12 July, the Constitutional Court struck down article 13 of the press law of 1948, which had made imprisonment of one to six years mandatory where the defamation attributed a specific fact, together with the broadcasting equivalent in the 1990 statute. It expressly declined to strike down article 595, third paragraph, because that provision leaves the court a choice between imprisonment and a fine.

So the criminal route survives, narrowed. Its existence changes the posture of a reputational matter, because a complaint is a public act that creates a public file, and the file outlives the article. The calculation is set out in The Cost of Looking: an enquiry, and a fortiori a prosecution, alters the thing it examines.

What we do, and where

We act for families and institutions whose Italian holdings, counsel and advisers sit in Milan: counterparty and ownership work before a transaction, evidence for Italian proceedings, and the reputational analysis that decides whether a remedy is worth invoking.

We keep no office in Milan, hold no Italian licence and do not practise Italian law. Nothing above is legal or tax advice; structures are designed alongside independent counsel in each relevant territory, and a principal considering one should take advice from an adviser unrelated to Privy Consul. Figures stated here are those in force on 16 August 2026.

The succession half sits under Succession, Continuity & Legacy Governance, the transaction half under Due Diligence Investigations, and the reputational half under Reputation Management & Media Relations. The neighbouring arguments, from different statutes, are Swiss Banking Secrecy Was Never Repealed and Monaco Presumes You Live There.