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For an Australian who owns an international or online business and is genuinely willing to relocate, Italy offers one of the most powerful personal tax outcomes available anywhere in the European Union. Like the Greek strategy we describe elsewhere, this is a relocation strategy, not a paper structure. It depends on actually moving to Italy and making it your home. For those who do, the reward is unusual: an Italian tax resident who elects into the regime for new residents pays a single fixed amount of tax each year that covers all of their foreign income. Not a rate, and not a percentage that climbs as the income grows. One flat payment, and the foreign income above it is not taxed again in Italy.
This guide sets out how the strategy works, who it works for, how an Australian relocating to Italy becomes an Italian tax resident (whether through an EU passport, the Investor Visa or the Elective Residence Visa), and the issues that have to be managed to make it hold up.
The strategy in one paragraph
An international corporate structure is established in a tax-efficient jurisdiction. The company earns and accumulates business or investment income. It then pays that income out to its shareholder, who has become an Italian tax resident and has elected into Italy's regime for new residents under Article 24-bis of the Italian tax code. Instead of taxing that foreign income at Italy's ordinary progressive rates, which reach 43 per cent before surtaxes, Italy charges a flat substitute tax of EUR 300,000 a year, and the foreign income is not taxed again. The headline figure is large, but it is fixed. Once foreign income is high enough, the effective rate falls well below anything achievable as an Australian resident.
Who the strategy works for
The strategy works for businesses whose income is genuinely international or location-independent, rather than tied to an Australian premises or an Australian customer base. In practice that means technology and software businesses, content creators and influencers, online service, marketing and consulting businesses, intellectual property holding, and investment portfolios held through a company.
What these have in common is that the income can legitimately be earned and accumulated through a company outside Australia, and the owner can run that business from anywhere. A bricks-and-mortar Australian business does not fit, because its income remains Australian-sourced and Australian-taxed regardless of where the owner lives. An online or international business does fit, which is what makes the relocation worth doing.
Italy adds one filter that Greece does not. Because the substitute tax is a fixed amount rather than a rate, the regime only rewards genuinely large foreign income. We return to where that break-even point sits below, but the short version is that Italy is the high-income option, and the Greek 5 per cent strategy or another jurisdiction will usually be the better answer for more modest income.
The flat tax regime
Italian tax residents are ordinarily taxed on their worldwide income at progressive rates that reach 43 per cent, before regional and municipal surtaxes. The regime for new residents in Article 24-bis of the Italian Income Tax Code changes that completely for foreign income.
An individual who becomes an Italian tax resident, and who was not an Italian tax resident for at least nine of the ten preceding years, can elect to pay a flat substitute tax in place of ordinary Italian taxation on all of their foreign-source income. The substitute tax replaces Italian tax on foreign dividends, interest, royalties, rental income, capital gains and business income alike. There is no requirement to bring the income into Italy, and no progressive scale. The amount is the same whether foreign income for the year is one million euros or fifty.
The 2026 Italian Budget Law, approved on 30 December 2025, increased the flat tax. For anyone electing into the regime from 1 January 2026, the amount is EUR 300,000 a year, up from EUR 200,000. A spouse or other family member can be brought within the same election for a further EUR 50,000 each per year. Taxpayers already in the regime before 1 January 2026 keep the lower figure for the remainder of their term, so timing the move against the budget cycle matters.
The election lasts for up to 15 years from the year Italian tax residency begins. It can be ended earlier, and it lapses automatically if the annual payment is missed. Because eligibility turns on the nine-of-ten-years residency history, it is sensible to confirm the position with the Italian Revenue Agency through its advance ruling procedure before relocating.
Three further features make the regime more than just a flat rate. First, the new resident is relieved from Italy's wealth taxes on foreign assets, and from the foreign-asset reporting that ordinary Italian residents must complete each year. Second, while the election is in force, Italian inheritance and gift tax reaches only assets situated in Italy, which is significant for estate planning. Third, the controlled foreign company rules, discussed below, do not apply to the foreign income covered by the substitute tax.
Becoming an Italian tax resident
The flat tax is a benefit of being an Italian tax resident, so the relocation has to be real. Italy reformed its residency test with effect from 2024. An individual is an Italian tax resident if, for more than half the year, any one of the following is true: they are physically present in Italy; they have their residence in Italy, meaning their habitual home; or they have their domicile in Italy, meaning the place where their personal and family life principally develops. Registration on the Italian resident population register also creates a presumption of residence that the individual would have to displace.
An Italian tax resident is taxed on worldwide income. A non-resident is taxed only on Italian-source income. Becoming a resident is therefore a deliberate step, and it is that step, combined with the Article 24-bis election, that unlocks the flat tax.
Route 1: an EU passport
The simplest way into Italy is an EU passport, because EU citizenship carries freedom of movement. An EU citizen can move to Italy, or to any other member state, and live there indefinitely with no visa, no investment and no permit. The relocation becomes a purely practical exercise.
Italy is the standout case for Australians here. Post-war migration means a very large number of Australians descend from Italian parents and grandparents, and Italy has long granted citizenship by descent. An Australian with a qualifying Italian ancestor has the cleanest and most durable route into the strategy, because citizenship, unlike a visa, cannot lapse and carries no investment cost.
One caution matters. Italy tightened its citizenship-by-descent rules in 2025. A reform in force from late March 2025 introduced a generational limit: automatic recognition by descent now generally requires a parent or grandparent born in Italy, where the previous law allowed claims through great-grandparents and beyond. Anyone whose Italian ancestor is more distant will need advice on whether they still qualify, and on the alternative paths that remain. Citizenship of any other EU member state works just as well for this strategy; the relevant question is EU citizenship, not Italian citizenship specifically.
Route 2: the Italian Investor Visa
For Australians without an EU passport, Italy offers two main residence routes. The first is the Investor Visa, the residence-by-investment route. It is granted for an initial two years and renewed in three-year increments while the qualifying investment is maintained, and it supports residence applications for the investor's spouse and dependent children.
The investor must commit to one of the following:
- EUR 250,000 in an Italian innovative startup;
- EUR 500,000 in the shares or quotas of an established Italian company;
- EUR 1 million as a philanthropic donation to an Italian institution working in culture, research, heritage, education or immigration management; or
- EUR 2 million in Italian government bonds.
The qualifying investment must be made shortly after entry and held for the life of the permit. The Investor Visa is an immigration permission. Like the Greek Golden Visa, it does not by itself make the holder an Italian tax resident.
Route 3: the Elective Residence Visa
The second route, and in practice the more common one for people relocating to live on investment income rather than to run a business, is the Elective Residence Visa. It is designed for individuals who can support themselves from stable passive income arising outside Italy and who do not intend to work or carry on a business in Italy.
The applicant must show substantial and durable passive income, with a commonly cited minimum in the order of EUR 31,000 a year for an individual and higher amounts for a spouse and dependants. In practice, consular posts expect considerably more from high-net-worth applicants, and securing a suitable Italian home, by long-term lease or purchase, is effectively part of the application. The Elective Residence Visa fits the Article 24-bis regime particularly well, because the regime is concerned with foreign-source income and the visa is granted precisely to people who live on foreign-source income.
The corporate structure
The other half of the strategy is where the company sits. Under the Article 24-bis regime, the destination of the foreign income matters less than it does in the Greek strategy, because the flat tax covers the foreign income whatever its character and wherever it is paid from. There is no need to chase a jurisdiction with no dividend withholding tax to make the numbers work.
What still matters is the tax cost suffered before the income reaches the shareholder, and the substance the company genuinely carries. Foreign tax withheld or paid at the company level is a real cost, and the Italian substitute tax does not refund it. The choice of corporate jurisdiction, the substance the company can support, and the way it is managed therefore still need to be designed together. There is no single correct jurisdiction. Our other articles discuss the corporate options in detail, and Cadena International advises on the best choice for each client's situation.
The issues that have to be managed
The strategy is sound, but it depends on four things being handled properly.
1. The flat tax is a fixed cost, not a rate
The EUR 300,000 figure is an annual cost that does not move with income. That cuts both ways. Above a certain level of foreign income the effective rate becomes very low and keeps falling; below it, the flat tax is simply expensive. As a rough guide, the regime becomes worthwhile once foreign-source income is in the region of EUR 700,000 to EUR 800,000 a year, measured against ordinary Italian rates of up to 43 per cent plus surtaxes. The decision is close to all or nothing, so the income profile, and its likely path over a fifteen-year horizon, should be modelled properly before committing. For income below that range, the Greek 5 per cent strategy or another jurisdiction will usually be the better answer.
2. What the regime does not shelter
The substitute tax covers foreign-source income. It does not touch Italian-source income, which continues to be taxed under the ordinary progressive rules. Income from work physically performed in Italy, and income from Italian assets, sits outside the regime. There is also a deliberate carve-out: capital gains on the disposal of a substantial shareholding, if realised within the first five tax years of the regime, are excluded from the flat tax and taxed under ordinary Italian rules. The rule exists to stop a new resident moving to Italy, selling a major stake almost tax-free, and leaving. Any planned sale of a significant holding has to be timed against that five-year window.
3. Place of effective management and esterovestizione
If the shareholder runs the foreign company day-to-day from Italy, Italy can treat the company itself as an Italian tax resident, on the basis that it is managed and controlled from Italy. Italy applies this robustly through its esterovestizione doctrine, which looks through companies that are foreign in form but Italian in management. A company treated as Italian-resident exposes its entire profit to Italian corporate income tax of 24 per cent, plus regional production tax, before the question of distributing income to the shareholder is even reached, and that corporate-level tax is not covered by the individual's substitute tax. The company needs genuine management substance outside Italy. The controlled foreign company rules, by contrast, are far less of a concern here: foreign income covered by the Article 24-bis substitute tax is not subject to controlled foreign company attribution.
4. Ceasing Australian tax residency
The flat tax is only meaningful once the shareholder is no longer an Australian tax resident. While they remain an Australian resident, Australia taxes the same income at rates up to 47 per cent. The departure from Australian residency must be clean and deliberate, and it must account for CGT event I1, which deems a disposal of the departing resident's non-Australian-property assets at market value on the day they cease to be a resident. Italy holds one clear advantage over Greece here: Australia and Italy have a double tax treaty in force, so there is a tie-breaker to resolve any year in which both countries might claim the individual as a resident. The treaty reduces, but does not remove, the need to plan the exit. CGT event I1 still applies, and the timing of the move relative to dividends, share sales and trust distributions remains as important as the destination tax outcome.
Is Italy the right destination?
Italy suits owners of international or online businesses whose foreign income is genuinely large, Australians who hold or can obtain an EU passport (and Italian descent makes that unusually common), and people who are willing to make Italy their home. It is less suited to those whose foreign income is too modest to justify a EUR 300,000 annual cost, those whose income remains Australian-sourced, and those whose income is mainly personal services income performed in Italy, which falls outside the regime and is taxed at ordinary rates.
For the right person, the combination is hard to match: a home almost anywhere in Italy, from the cities to the coast to the countryside, freedom of movement across the European Union, the certainty of a tax treaty with Australia, and a single fixed tax bill on a very large foreign income. The strategy rewards being deliberate. The relocation has to be real, the foreign income has to be large enough to justify the flat tax, the Australian exit has to be clean, and the corporate structure has to be built with the Italian rules in mind.
Cadena International advises Australians on international relocation and corporate structuring, including the Italian strategy described here. If you are considering a move to Italy, we can help you design and implement it. You may also be interested in our guides to relocating to Panama and the Cayman Islands.
This material is produced by Cadena International. It is intended to provide general information and opinions on legal topics, current at the time of first publication. The contents do not constitute legal advice and should not be relied upon as such.
