On August 7, 2024, Italian Prime Minister, Giorgia Meloni, publicly announced that Italy’s flat tax on income will be going up from €100,000 to €200,000. This is effective as of August 10, 2024.
This drastic change in flat tax will not apply retroactively, meaning that all residents already residing in Italy will still pay the €100,000 annual levy. So, only new wealthy residents will have to deal with the €200,000 charge. It’s important to note that this measure will only include worldwide income and won’t have any effect on the inheritance of foreign residents.
This decision came directly from the Italian Council of Ministers and falls under the Draft Law Decree. It deals with ongoing economic issues and is meant to provide security.
Originally introduced in 2017, the flat tax rate was set at €100,000 with the goal of attracting wealthy individuals to Italy. By paying this annual flat tax, affluent residents could be exempt from all other taxes on income and inheritance for up to 15 years.
Since 2017, over 1,100 wealthy individuals have resided within Italian borders and have benefited from the flat tax rate. The idea behind this measure was to attract as many foreign investors as possible to help Italy grow and prosper. Unfortunately, according to Giancarlo Giorgetti, Italian Finance Minister, it was incredibly hard to determine the actual number of taxpayers who have given back to Italy.
The Finanance Minister further said that the new rate should still be appealing to wealthy residents deciding on their residency. Giorgetti also noted that it’s important that the countries don’t jump into the race to the bottom and try to compete with one another to deliver the lowest rates for high-worth companies and individuals. According to him, this dynamic promotes inequality and has a significant impact on regional imbalances. “We are against starting a competition because countries like Italy, which have very limited fiscal space, are destined to lose,” Giorgetti said during a press conference.
Finally, while the flat tax increase is expected to help reduce Italy’s budget deficit, the exact revenue generated by this change remains uncertain.
