The New Resident Regime – Updates Introduced by the Draft Budget Law
On October 22, the draft Budget Law for the year 2026 was submitted to Parliament, and it must be approved by December 31 of the current year.
As anticipated in the previous newsletter, the rumors regarding potential changes to the special regime for new residents have materialized in Article 11 of the Draft Budget Law currently under discussion at the Parliament. This article aims to amend the amount of the substitute tax applicable to income produced abroad by individuals who transfer their tax residence to Italy and exercise the option for the regime referred to in Article 24-bis of the Italian Income Tax Code (“T.U.I.R.”).
The main conditions to access the regime remain unchanged, while – if approved – the amount of the substitute tax will be increased from €200,000 to €300,000 starting from the date the Budget Law enters into force.
In addition, the amount of the substitute tax applicable to family members of the main new resident [LDP – GB] taxpayer will also change, increasing from the current €25,000 to €50,000.
- Access Conditions
The access conditions to the regime have not been modified and remain unchanged compared to previous versions; therefore, it is required for the individual (and their family members) to:
a) Transfer their tax residence to Italy pursuant to Article 2 of the T.U.I.R. (i.e. have residence, domicile, or be physically present in Italy for the majority of the tax period);
b) Not have been fiscally resident in Italy for at least 9 of the 10 tax periods preceding the first year in which the option becomes effective.
- Entry into Force of the New Regime
Article 11, paragraph 2 of the 2026 Draft Budget Law explicitly provides that the new provisions shall apply to individuals who will transfer their residence for the purposes of Article 43 of the Civil Code starting from the date on which the law enters into force.
In this context, individuals who transfer their civil residence to Italy before the date of entry into force of the law should not be affected by the application of the new provisions.
It should be recalled that, pursuant to Article 43 of the Civil Code, “civil residence” refers to the place where a person has his/her habitual abode, characterized by habitual and voluntary dwelling in a specific location, recognizable by third parties, and defined by two elements:
– objectivity, meaning a prolonged and appreciable permanence in the chosen place; and
– subjectivity, meaning the individual’s intention to permanently live in that place, as can be noticed/observed from their habits and lifestyle (e.g. social, family, and personal relationships).
The changes relating to the increase in the substitute tax should therefore not apply to individuals who decide to transfer their (civil) residence to Italy before the entry into force of the 2026 Budget Law, provided that the proposed amendments will be approved in their entirety.
However, individuals wishing to benefit from the current provisions should act promptly to transfer their residence to Italy and establish, also through solid actions, their civil residence — for example, by purchasing a property, signing a residential lease agreement, registering with the Office of Record of Resident Population, or applying for a visa in the case of non-EU citizens.
Considering, however, the complexities that a transfer to Italy may entail for the taxpayer and their family members, and taking into account that the definition of “habitual abode” requires an assessment of de-facto circumstances, it is desirable that Parliament provide clarifications or link the applicability of the new provisions to certain and easily documentable conditions, clarifying the amount payable by individuals who manage to transfer their residence to Italy before the law enters into force.