Italy

The Italian Budget Law for fiscal year 2026 introduced several changes affecting individuals.

The main changes include:

• new personal income tax rates, with the second national income tax bracket reduced to 33% from FY 2026;
• a reduction of the tax credit/neutralisation mechanism for certain deductible expenses for taxpayers with total income exceeding EUR 200,000;
• confirmation of rates for tax deductions and expense thresholds linked to building renovation bonuses;
• increase of the flat tax for applicants and family members under the lump sum tax regime for new resident individuals;
• increase of the deductible limit from gross taxable income for social security contributions paid to supplementary pension funds;
• a reduction of the tax rate for productivity bonuses, applicable for FY 2026 and FY 2027;
• changes to the flat tax rate, so-called cedolare secca, on short-term rentals;
• new tax-exempt daily limit for electronic meal vouchers;
• new tax rate on capital gains and income deriving from crypto-assets.

From FY 2026, the national PIT rates are as follows:

For taxpayers with total income exceeding EUR 200,000, a reduction of EUR 440 applies to certain tax credits for expenses deductible at 19%. The reduction does not apply to medical expenses, donations made to political parties, or insurance premiums covering the risk of catastrophic events.

The Budget Law for FY 2026 also increased the flat tax for new resident individuals under the lump sum tax regime and for their family members. For individuals transferring their legal residency to Italy from 1 January 2026, the flat tax is increased to EUR 300,000. For family members, the flat tax is increased to EUR 50,000.

The Budget Law for FY 2026 also increased the tax rate from 26% to 33% on capital gains and income deriving from crypto-assets. The 26% rate remains applicable to stable coins, i.e. e-money tokens denominated in euros.

Under Legislative Decree no. 209/2023, no explicit restriction was initially provided with respect to the potential interaction between the inbound workers regime and other favourable tax regimes, including the regime for new resident individuals. This interpretation was also supported by a tax ruling issued by the Italian Tax Authority in December 2025, which confirmed the possibility for qualifying individuals to apply such regimes concurrently within the same tax period.

However, following the enactment of Law Decree no. 38/2026, a clarifying provision has been introduced, expressly denying the possibility to combine the inbound workers regime with other preferential tax regimes, including the regime for new resident individuals.

As a result, the concurrent application of these regimes is no longer permitted.