Tax residency and wealth structuring for new Italy residents

Tax residency and wealth structuring for new Italy residents The question of when Italy considers someone a tax resident has acquired unusual urgency in 2026 because the statutory test turns on facts that are often managed casually by mobile families. Italy applies a 183-day physical-presence rule (184 in a leap year), but the law also activates residency if the individual’s centre of vital interests — family, economic activity, habitual abode — is in Italy, regardless of the day count. The 2025 *decreto fiscale* (Legislative Decree No. 209/2024, effective 1 January 2025) tightened the burden of proof for individuals who spend fewer than 183 days in Italy but maintain a dwelling that is “available” to them, defined as any property held in full ownership, usufruct, or long-term lease. For a high-net-worth individual arriving under the special flat-tax regime for new residents (Article 24-bis, TUIR, introduced by Law No. 232/2016 and amended by Law No. 160/2019), the distinction between a compliant relocation and an unintended residence audit is a difference in annual tax liability that can exceed several million euros. This article maps the statutory rules, the elective regimes, and the pre-arrival structuring decisions that determine whether the Italian tax outcome is a net gain or a costly surprise. ## The statutory residency test Italy’s residency definition is codified in Article 2 of the Testo Unico delle Imposte sui Redditi (TUIR, Presidential Decree No. 917/1986). A person is considered resident for tax purposes if, for the greater part of the tax year (183 days, or 184 in a leap year), they satisfy at least one of three conditions: formal registration in the *anagrafe* (population register), having their habitual abode in Italy, or having their centre of vital interests in Italy. The third condition mirrors the OECD Model Tax Convention’s “centre of vital interests” tiebreaker and has been interpreted broadly by the Italian Supreme Court (Corte di Cassazione, Sentenza No. 17291/2021), which held that economic interests alone — including the location of a family office, the management of a business, or the presence of a professional team — can establish residency even when the individual spends fewer than 183 days in the country. ### The 183-day rule and its exceptions Counting days is not straightforward. Italian law counts any part of a day as a full day present, and days of arrival and departure both count. The Agenzia delle Entrate (Italian Revenue Agency) has clarified in Circular No. 20/E of 2023 that a day spent in Italy for any reason — business, leisure, transit — counts toward the 183-day threshold unless the individual can demonstrate that their presence was entirely fortuitous and involuntary, a standard that is rarely met in practice. For a UHNW principal who maintains a residence in Milan or Rome while travelling extensively, the practical risk is that the Agenzia will aggregate days across multiple entry stamps and, if the total exceeds 183, shift the burden of proof onto the taxpayer to show that the centre of vital interests remains abroad. ### The “available dwelling” rule after the 2025 reform Legislative Decree No. 209/2024 introduced a presumption that any individual who owns or holds a dwelling in Italy on a basis that makes it “available” — including full ownership, bare ownership (*nuda proprietà*), usufruct, or a lease of 12 months or longer — is deemed to have their habitual abode in Italy unless they prove otherwise. The presumption is rebuttable, but the taxpayer must provide documentary evidence that the dwelling is not used, such as utility bills showing zero consumption, a formal rental to an unrelated third party, or proof of residence registration in another jurisdiction. For a family that acquires a *villa* in Tuscany for occasional use, this rule creates a presumption of residency from the date of purchase, regardless of the actual days spent in Italy. ## The special flat-tax regime for new residents (Article 24-bis) Italy’s most consequential wealth-structuring tool for inbound HNWIs is the optional flat tax on foreign-source income, codified in Article 24-bis of the TUIR. Eligible individuals who have not been tax resident in Italy for at least nine of the ten preceding tax years may elect to pay a flat annual tax of €100,000 on all foreign-source income, regardless of its amount. The election lasts for up to 15 years and can be extended to family members (spouse and children under 26) at an additional €25,000 per person per year. The regime was originally introduced by Law No. 232/2016 and was expanded by Law No. 160/2019 to allow the flat tax to cover capital gains realised on the disposal of foreign investments, provided the assets were held before the election date. ### Scope of the exemption Foreign-source income under Article 24-bis includes dividends, interest, rental income, business profits, and capital gains from assets located outside Italy. The Agenzia delle Entrate clarified in Ruling No. 104/2020 that the flat tax also covers income from foreign trusts, foundations, and other fiduciary structures, provided the settlor and the assets are outside Italy. Italian-source income — including income from Italian real estate, Italian employment, or Italian business activities — remains fully taxable at ordinary progressive rates (up to 43 percent, plus regional and municipal surcharges). The practical consequence is that a new resident who holds a global portfolio of listed equities, private equity stakes, and real estate outside Italy can structure their affairs so that the only Italian tax liability is the €100,000 flat payment, plus Italian-source taxes on any local income. ### The 15-year horizon and exit planning The flat-tax election is irrevocable once made and applies for a maximum of 15 consecutive tax years. After the 15th year, the individual becomes a full worldwide taxpayer under ordinary rules. There is no statutory mechanism to renew or restart the regime, so the 15-year clock is a fixed planning horizon. Individuals who expect to remain in Italy beyond 15 years must plan for the transition, which may involve relocating assets to Italian structures, realising gains before the expiry date, or exiting Italy before the 15th year to preserve the tax-free status of certain foreign assets. The Agenzia delle Entrate has not issued guidance on whether a temporary departure and re-entry would reset the nine-out-of-ten-year non-residence test, and the prevailing legal opinion is that it would not, because the regime is available only once per individual. ## Capital gains taxation for residents and non-residents Italy taxes capital gains differently depending on whether the gain is classified as Italian-source or foreign-source, and on whether the individual is a resident under Article 24-bis or under ordinary rules. For ordinary residents, capital gains on “qualified” shareholdings (more than 2 percent voting rights or 5 percent capital in a listed company, or more than 20 percent voting rights or 25 percent capital in an unlisted company) are taxed at 26 percent on 100 percent of the gain. Gains on non-qualified shareholdings are taxed at 26 percent on 100 percent of the gain as well, following the 2018 *Legge di Bilancio* (Law No. 205/2017), which unified the rate. For residents under Article 24-bis, foreign-source capital gains are covered by the flat tax and are not subject to the 26 percent withholding, provided the assets were acquired before the election date and are held outside Italy. ### The exit tax risk for high-value assets Italy imposes an exit tax (Article 166, TUIR) on individuals who transfer their tax residence abroad while holding certain high-value assets. The exit tax applies to shares in controlled companies, qualifying shareholdings, and other assets where the unrealised gain exceeds €100,000. The tax is calculated on the fair-market value of the assets at the date of emigration, and the gain is taxed at the ordinary 26 percent rate. For a UHNW individual who has been resident in Italy under Article 24-bis and then leaves, the exit tax applies to assets that were held during the Italian residency period, including foreign assets that were previously covered by the flat tax. The Agenzia delle Entrate confirmed in Ruling No. 45/2022 that the exit tax applies even if the assets were never taxed in Italy, because the exit tax is triggered by the change of residence, not by the source of the gain. ### Real estate and the cadastral value trap Italian real estate is always Italian-source, regardless of the owner’s residence status. For a new resident under Article 24-bis, rental income from an Italian property is taxed at ordinary progressive rates, and capital gains on the sale of Italian property are taxed at 26 percent (if the property is held for less than five years) or are exempt (if held for more than five years, under Article 67, TUIR). The trap for inbound HNWIs is that Italian real estate is assessed for wealth-tax purposes using the *rendita catastale* (cadastral income), which is typically far below market value — often 10 to 20 percent of the actual market price. The *IMU* (municipal property tax) and the *IVIE* (wealth tax on foreign real estate, for residents who hold property abroad) are both calculated on this low cadastral base, making Italian real estate relatively tax-efficient for holding, but the low basis also means that a future sale at market value will produce a large taxable gain if the property is sold within five years. ## Pre-arrival structuring: the decisions that matter The most material tax-planning decisions for a new Italy resident are made before the first day of residence. Once the individual is formally registered in the *anagrafe* or has spent 183 days in Italy, the window for restructuring foreign assets without triggering Italian tax closes. The following structuring steps are commonly executed in the six to twelve months before relocation. ### Asset relocation and the “clean base” strategy Under Article 24-bis, only foreign-source income and gains that arise after the election date are covered by the flat tax. Gains that accrued before the election date but are realised after the date are taxable in Italy unless the asset was sold before the election. The standard strategy is to sell all foreign assets that have significant unrealised gains before becoming an Italian resident, then repurchase the same assets (or similar ones) after the election is in place. This “clean base” approach ensures that future gains are taxed at the flat €100,000 rate rather than at 26 percent. For illiquid assets such as private equity stakes or real estate, the sale may not be feasible before relocation, and in those cases the taxpayer should consider a step-up in basis under the applicable foreign tax treaty or, if none exists, accept that the gain will be taxed at 26 percent upon disposal. ### Trust and foundation re-domiciliation Italy does not have a comprehensive trust law in the common-law sense, but it recognises foreign trusts under the Hague Convention of 1 July 1985 (ratified by Italy with Law No. 364/1989). For a new resident who is the settlor or beneficiary of a foreign trust, the Italian tax treatment depends on whether the trust is classified as “opaque” or “transparent” under Italian rules (Article 73, TUIR). A trust that is considered transparent — where the settlor retains control or the power to revoke — is treated as a pass-through, and the trust’s income is attributed directly to the settlor. This defeats the purpose of the flat tax if the trust holds foreign assets, because the income is attributed to the settlor as foreign-source income and is covered by the flat tax, but the trust’s Italian-source income is taxed at ordinary rates. The pre-arrival step is to review the trust deed and, if necessary, amend it to ensure that the settlor does not retain powers that would trigger transparency treatment. The Agenzia delle Entrate’s Ruling No. 811/2021 provides guidance on the factors that distinguish opaque from transparent trusts. ### Family office and management location The centre-of-vital-interests test means that the location of a family office or investment management team can establish Italian residency even if the individual is physically absent. For a UHNW principal who intends to spend fewer than 183 days in Italy but wants to manage a global portfolio, the safest structure is to locate the family office in a jurisdiction that is not Italy — Switzerland, Luxembourg, or Singapore — and to ensure that all investment decisions are made outside Italy. If the family office is in Milan, the Agenzia delle Entrate will argue that the centre of vital interests is Italy, and the individual will be deemed resident regardless of the day count. The 2025 reform (Legislative Decree No. 209/2024) specifically mentions the location of “professional and managerial activities” as a factor in the centre-of-vital-interests analysis, reinforcing the need to separate management from residence. ## The investor visa pathway and its tax implications Italy’s Investor Visa for Italy, administered by the Ministry of Economic Development (MISE, now part of the Ministry of Enterprises and Made in Italy), offers a two-year visa for non-EU citizens who make a qualifying investment. The minimum thresholds, as published on the official investor visa portal (investorvisa.mise.gov.it), are €2 million in Italian government bonds, €500,000 in an Italian limited company, €250,000 in an Italian innovative startup, or €1 million in a philanthropic initiative. The visa itself does not grant tax residency — that is determined by the TUIR test — but it facilitates the physical presence that often leads to residency. ### The interaction with Article 24-bis An investor who enters Italy under the investor visa and subsequently becomes resident can elect the Article 24-bis flat tax, provided they meet the nine-out-of-ten-year non-residence test. The investor visa does not waive the non-residence test, nor does it provide any automatic tax benefits. The practical value of the visa is that it allows a non-EU national to establish a compliant presence in Italy without the administrative hurdles of a standard residency application, and the investment itself — if it is in a qualifying Italian company or startup — may generate Italian-source income that is outside the flat tax. An investor who puts €500,000 into an Italian limited company will pay ordinary Italian corporate tax on the company’s profits and ordinary Italian personal tax on any dividends distributed, even if the flat tax covers all other foreign income. ### The suspension for Russian and Belarusian citizens The investor visa program is currently suspended for Russian and Belarusian citizens, as per the order of the Chairman of the Committee dated 14 July 2023, implementing EU Recommendation C(2022) 2028. The suspension also applies to non-EU citizens who hold a second passport that is Russian or Belarusian, as clarified by the MAECI note of 20 March 2024. This suspension has no direct effect on the Article 24-bis flat tax, which remains available to Russian and Belarusian citizens who meet the non-residence test through other visa pathways, but it removes the investor visa as a practical entry route for this group. ## Compliance and reporting obligations The Article 24-bis flat tax does not eliminate the obligation to file an annual tax return (*Modello Redditi PF*). The taxpayer must declare the election of the flat tax, list all foreign assets and income (even if exempt), and pay the €100,000 flat amount. Failure to file the return or to pay the flat tax on time results in the loss of the regime for that tax year, and the taxpayer reverts to ordinary worldwide taxation. The Agenzia delle Entrate has the authority to audit the taxpayer’s compliance with the non-residence test for the nine-out-of-ten years preceding the election, and if the test is not met, the election is void and back taxes plus penalties apply. ### The foreign asset monitoring obligation (RW form) All Italian residents who hold foreign financial assets exceeding €15,000 must file the *RW form* (part of the *Quadro RW* in the annual return) and pay the *IVAFE* wealth tax on foreign financial assets (0.2 percent of the value for most assets, capped at €14,000 for certain holdings). For a resident under Article 24-bis, the IVAFE applies to foreign assets even though the income from those assets is covered by the flat tax. The IVAFE is a separate tax, not waived by the flat-tax election. The cost is modest — 0.2 percent of the asset value — but the reporting requirement is strict, and failure to file the RW form triggers penalties of 3 to 15 percent of the unreported amount, plus the risk of a tax evasion assessment. ## The 15-year expiry and the post-regime landscape An individual who has been resident under Article 24-bis for the full 15 years faces a transition to ordinary worldwide taxation. The planning window for this transition opens in year 12 or 13, not in year 15. The key decisions are whether to sell foreign assets before the expiry date (to realise gains under the flat tax), whether to relocate assets to Italian structures (which will then be subject to Italian-source taxation), or whether to exit Italy before the 15th year to preserve the tax-free status of certain assets. The exit tax under Article 166 will apply to any assets that have appreciated during the Italian residency period, and the tax is calculated on the fair-market value at the date of exit, not on the original cost basis. For a portfolio that has grown significantly over 15 years, the exit tax can be substantial, and the only way to avoid it is to sell the assets before exiting or to structure the exit so that the assets are transferred to a non-Italian entity before the change of residence. ## Four conclusions for the incoming principal The flat-tax regime under Article 24-bis is the most generous wealth-structuring tool available to new Italian residents, but its value depends entirely on pre-arrival execution, not on post-arrival compliance. The 183-day rule and the centre-of-vital-interests test create a real risk of unintended residency for individuals who maintain a dwelling in Italy without a formal plan to limit their presence. Capital gains on foreign assets should be realised before the first day of Italian residence to establish a clean basis, and illiquid assets that cannot be sold should be held in an opaque trust or corporate structure that avoids Italian transparency rules. The 15-year clock is fixed and non-renewable, so the exit strategy — whether a sale, a relocation, or a departure — must be designed before year 13 at the latest. ## Sources - Testo Unico delle Imposte sui Redditi (TUIR), Presidential Decree No. 917/1986, Article 2 (residency definition) and Article 24-bis (flat tax for new residents): https://www.normattiva.it/uri-res/N2Ls?urn:nir:presidente.repubblica:decreto:1986-12-22;917 - Legislative Decree No. 209/2024 (2025 fiscal reform, effective 1 January 2025), modifying the residency test: https://www.gazzettaufficiale.it/eli/id/2024/12/30/24G00203/sg - Law No. 232/2016 (2017 Budget Law, introducing Article 24-bis): https://www.gazzettaufficiale.it/eli/id/2016/12/21/16G00242/sg - Law No. 160/2019 (2020 Budget Law, expanding Article 24-bis): https://www.gazzettaufficiale.it/eli/id/2019/12/30/19G00165/sg - Agenzia delle Entrate, Circular No. 20/E of 2023 (day-counting and residency): https://www.agenziaentrate.gov.it/portale/web/guest/circolari - Agenzia delle Entrate, Ruling No. 104/2020 (flat tax on foreign trusts): https://www.agenziaentrate.gov.it/portale/web/guest/interpelli - Agenzia delle Entrate, Ruling No. 45/2022 (exit tax applicability): https://www.agenziaentrate.gov.it/portale/web/guest/interpelli - Agenzia delle Entrate, Ruling No. 811/2021 (opaque vs transparent trusts): https://www.agenziaentrate.gov.it/portale/web/guest/interpelli - Corte di Cassazione, Sentenza No. 17291/2021 (centre of vital interests): https://www.cortedicassazione.it - Investor Visa for Italy, official portal (MISE): https://investorvisa.mise.gov.it/index.php/en/ - Law No. 364/1989 (ratification of Hague Trust Convention): https://www.normattiva.it/uri-res/N2Ls?urn:nir:stato:legge:1989-10-16;364