The Italian Flat Tax and Milan's Prime Property Market

In recent years Milan has become one of Europe's leading destinations for high-net-worth individuals.

The introduction of the Italian flat tax regime has accelerated this trend, attracting entrepreneurs, investors and family offices from across Europe and beyond. For many of these new residents, the fiscal decision and the real estate decision occur almost simultaneously: choosing Milan as a place of residence often means purchasing a property in the city.

Understanding how the flat tax regime works is therefore essential for anyone considering a residential acquisition in Milan's high-end property market.

What Is the Italian Flat Tax

Since 2017 Italy has allowed new tax residents to replace ordinary income taxation on foreign income with a fixed annual substitute tax.

The regime has evolved over time:

• until 2024: €100,000 per year
• Omnibus Decree (August 2024): €200,000
• 2026 Budget Law: €300,000 for new applicants

An additional €50,000 per family member may be included in the regime.

Individuals who established tax residence in Italy before 31 December 2025 maintain the €200,000 regime for the entire duration of the benefit, up to a maximum of 15 years. The increase is not retroactive.

The regime also offers additional benefits: exemption from IVIE and IVAFE on foreign assets, no obligation to report assets in the RW tax form, and exemption from inheritance tax on foreign assets.

Who Uses This Regime

In recent years several thousand high-net-worth individuals have chosen Italy as their new tax residence, contributing to making Milan one of Europe's leading destinations for internationally mobile wealth.

Milan has emerged as the most visible centre of this trend. The city has experienced a significant increase in international entrepreneurs, professionals and families choosing it not only as a fiscal base but also as a long-term residential destination.

In 2024 the Financial Times documented a notable acceleration in the arrival of affluent expatriates to the city, further reinforced by the abolition of the UK non-dom regime from 2025.

Thousands — New residents in Italy (recent years)

35–50 % — International buyers(Knight Frank, Savills)

€14,650 — Avg price /sqm prime segment (H1 2025)

The Impact on Milan's Prime Property Market

The effect on the real estate market has been direct.

According to several market reports, international buyers today represent a significant share of Milan's prime residential segment, often estimated between 35% and 50% of transactions, with an even higher presence in the most exclusive segment.

Recent market analysis indicates that the average price in Milan's prime residential market has reached approximately €14,650 per square metre, with significantly higher values in the most exclusive micro-locations. In areas such as Brera and the Quadrilatero, certain high-end properties can exceed €20,000 per square metre, with exceptional transactions approaching €27,000 per square metre.

Individuals who choose Milan as their tax residence often purchase a property in the city as well.

The fiscal decision and the property acquisition are frequently taken together or within a short period of time.

In recent years Milan has also absorbed the majority of institutional investment in Italy's residential sector, confirming its position as the country's most liquid real estate market.

The 2026 Change — Will €300,000 Really Make a Difference?

Probably less than one might expect.

The regime remains economically attractive for individuals with foreign income above approximately €700,000–€800,000 annually, a level at which Italy's ordinary income tax rate of 43% would exceed the flat tax cost.

At the same time the European fiscal landscape is evolving:

• Portugal has closed the NHR regime
• the United Kingdom has abolished the non-dom regime
• other countries are reconsidering similar policies

In this context Italy remains a competitive destination for internationally mobile wealth.

What This Means for an International Buyer

For many international clients considering Milan, tax planning and property acquisition are part of the same strategic decision.

The sequence can matter: establishing tax residence in Italy before purchasing property may have different implications than doing so afterwards.

These are decisions that require the guidance of specialised independent tax advisors — professionals with whom Urban Selection regularly collaborates in international mandates.

It is also important to remember that income generated in Italy, including rental income, remains subject to ordinary taxation. Only foreign income benefits from the flat tax regime.

An Increasingly Competitive Market

The profile of buyers in Milan's prime segment is now very clear: financially sophisticated individuals who value discretion and efficiency.

Properties with genuine architectural quality — historic buildings, generous proportions and strong spatial potential — rarely remain available for long.

In an increasingly competitive market, the ability to identify these opportunities early becomes a decisive advantage.