If you are thinking about leaving the UK and moving to Italy, the tax opportunity is significant. But so is the complexity. Get the planning wrong, and you could end up liable to tax in both countries.

Something has shifted in the UK's relationship with internationally mobile, high-net-worth individuals. Since the abolition of the non-domicile and remittance basis regime, estimates suggest that between 1,500 and 2,000 non-doms have left the UK who would not otherwise have done so. When you consider that the average non-dom was paying somewhere between £120,000 and £180,000 in UK tax each year against an average UK taxpayer contribution of around £7,000, the arithmetic is uncomfortable for a government that needs revenue.

The direction of travel in much of Europe has been the opposite. Countries including Italy, Portugal and Cyprus have spent years building attractive personal tax regimes designed to draw in exactly the kind of internationally mobile individual the UK has been pushing away. In Episode 23 of the Tax Compass Podcast, Simon Roue speaks with Fabrizio Battaglia, partner at Studio Tributario Associato - Battaglia Cesari Zangrillo in Rome, about what Italy offers, what moving there actually requires, and where people regularly go wrong.

Why Italy, and Why Now

For individuals considering a move, the appeal of Italy is not only about tax. Fabrizio is clear that people are looking for somewhere safe and secure to live with their families, with reliable immigration processes and a lifestyle that genuinely works for them. Climate, culture and quality of life all feature in the decision.

But personal tax planning is a central driver. People leaving the UK are increasingly looking for jurisdictions where capital gains and dividends are not subject to heavy rates of tax. Italy, with the right regime in place, can deliver that.

Italy is not without competition. Portugal, Cyprus, Greece and various Middle Eastern jurisdictions are all chasing the same pool of internationally mobile individuals. Fabrizio makes the point directly: the Italian government has already increased the flat tax charge from €100,000 to €300,000, and it needs to be careful about how far it pushes things. People will simply go elsewhere.

The Three Main Italian Tax Regimes

There are three personal tax regimes in Italy that are relevant for people arriving from the UK.

The flat tax regime applies a single annual charge of €300,000 to all overseas income, regardless of how much that income actually is. There is one important restriction: the sale of qualifying shareholdings cannot be carried out during the first five years of the regime. For high earners with significant overseas income, the maths can be compelling.

The pensioner regime is available to those who move to a municipality in southern Italy with fewer than 20,000 inhabitants. All overseas income, including pension income, dividends and capital gains, is taxed at a flat rate of 7%. Fabrizio points out the contrast with the ordinary regime, where dividends and capital gains would be taxed at 26%. The saving is 19 percentage points. For someone with a significant pension considering where to spend their retirement, this is a meaningful number.

The expatriate regime is aimed at employees and self-employed workers relocating to Italy. It exempts either 50% or 60% of income from Italian tax, depending on whether the individual moves with at least one child. There is a cap of €600,000 of income, a five-year time limit, and since 2024 there is no option to renew after that initial period expires. This is a different proposition to what was available before 2024, and anyone who heard about this regime some years ago should not assume the rules are the same now.

What Italian Tax Residency Actually Requires

Italian residency rules changed at the start of 2024, and the changes matter.

The primary test is now domicile, which is defined as the centre of your personal interest. In practice, that means where your family is actually located. Physical presence in Italy for at least 183 days is also relevant, as is the concept of habitual abode: the intention to remain in Italy for at least 183 days, demonstrated through actions such as purchasing a property, keeping a bank account open, or maintaining a base you intend to return to. Registration with your local municipality is no longer a binding requirement, though it remains useful evidence.

This sounds straightforward. It is not.

The double tax treaty between Italy and the UK uses different criteria to determine domicile than Italian domestic law does. The treaty refers to both your economic centre and your family centre. Italian domestic law focuses on personal and family ties. That gap is where conflicts arise, and it is one of the most common reasons why people who believe they have cleanly broken UK residency and established Italian residency find themselves with unexpected obligations in both countries.

Visas and Tax Regimes Are Linked

One of the most significant differences between the Italian and UK systems is the direct link between visa type and the tax regime available to you. In the UK, the statutory residence test operates entirely separately from immigration status. In Italy, the visa you hold shapes your tax position.

The three main routes are the digital nomad visa, the investor visa and elective residency. The digital nomad visa needs to be renewed every year. The investor visa requires a commitment to invest at least €500,000, typically in an Italian company, and that investment must be held for a minimum of two years. Fabrizio's practical suggestion for those using the investor route is to consider a blue-chip investment that pays an annual dividend, given that investment values can move in both directions. Elective residency is simpler in terms of process but has its own financial requirements.

There is no useful tax planning without proper immigration planning running alongside it. Fabrizio is emphatic on this point, and it is one that Simon echoes from the LSR Partners side.

Permanent Establishment Risk for Entrepreneurs

For entrepreneurs and business owners considering a move to Italy, there is a risk that does not always feature prominently in the initial conversation: permanent establishment.

If you are working remotely in Italy but the work you are doing goes beyond auxiliary activities or simple advertising, and if it amounts to operational activity aimed at selling products or services in Italy, the Italian tax authority may assess that your employer or your business has created a permanent establishment in Italy. Updated OECD rules mean that even a room in your home, if it is made available for the purposes of your foreign employer's business, can potentially trigger this assessment.

The consequences can be significant and the situation is not straightforward to unwind once it has arisen.

The Cost of Getting It Wrong

Simon makes the point directly in the conversation. He had a client who spent two days too many in the UK in a given tax year and ended up with an additional £20,000 tax liability. The statutory residence test does not offer discretion. You either meet the conditions or you do not.

The same principle applies in Italy. Once you have taken a step, you cannot always take it back. Filing for the wrong regime, failing to respect the timeline for obtaining a certificate of residency, or assuming that working in Italy creates no local obligations are all mistakes that create problems that are genuinely difficult to resolve.

What a Properly Structured Move Looks Like

Fabrizio outlines a three-phase approach that mirrors how LSR Partners approaches UK residency situations.

The first phase is assessment, before any action is taken. All relevant documents are reviewed, the individual's full situation is understood, and the right regime is identified based on the short, medium and long-term picture.

The second phase is implementation. The appropriate regime is applied for, and in the case of the flat tax regime, a ruling is filed with the Italian tax authority.

The third phase is ongoing compliance: annual tax management, handling any issues that arise, and ensuring that the conditions of the regime continue to be met.

The consistent message from both Fabrizio and Simon is the same one LSR Partners gives to every client considering a cross-border move. Speak to advisors before you act. The people who get the best outcomes are always the ones who had the conversation before anything happened, not after.

Listen to the Full Episode

Episode 23 of the Tax Compass Podcast is available now on Spotify, Apple Podcasts, YouTube and wherever you get your podcasts.

To speak with Fabrizio Battaglia directly, visit studiobcz.it or connect with him on LinkedIn.

If you are considering a move and want to understand how it affects your UK tax position, book a call with us at lsrpartners.com. LSR Partners help you pay the right tax in the right place at the right time.

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This article is for general information purposes only and does not constitute tax advice. Please contact us to discuss your specific position.