Italy's 2026 budget bill includes tax changes that directly impact foreign residents in the country. The proposal includes modest income tax cuts and alterations to rental income taxation. digital platforms and a new increase in flat tax for high-net-worth foreign residents.
The text is still under discussion in Parliament and may be amended by the end of the year. See the main points that affect those living in Italy with foreign citizenship.
Income tax cut
The proposal reduces the income tax rate from 35% to 33% for those earning between €28.001 and €50.000 per year. Lower and upper tax brackets remain at 23% and 43%, respectively. The government also proposes exempting overtime pay worked at night and on holidays from taxation.
Short-term rentals
Owners who rent properties through platforms such as Airbnb Companies like Booking.com will now pay a fixed tax rate of 26% on all properties. The current rule, with a two-tier system, will be maintained only for those who rent directly, without intermediaries. The measure may still be revised during the legislative process.
Increased flat tax for wealthy foreigners
A flat tax For high-net-worth foreigners, the tax will increase from €200 to €300 annually for those moving to Italy after December 31, 2025. The flat rate applies to income earned abroad and replaces the standard IRPEF (Brazilian income tax), which reaches 43% on amounts above €50. The rate had already been doubled in 2024, when it went from €100 to €200.
Benefits for working mothers
For mothers with two children, on temporary contracts or self-employed, and with an annual income of up to €40, the monthly benefit will increase from €40 to €60. Mothers with permanent contracts and three children will remain exempt from social security contributions up to a limit of €3 per year.
Bonus for home renovations
Incentives for reforms will continue in 2026. Ecobonus The tax on energy efficiency improvements remains between 36% and 50%, falling to 30% in 2027. The standard renovation bonus remains at 50%, capped at €96 per unit, until the end of 2026, returning to 36% thereafter. Deductions can be made over ten years on the income tax return.
Hiring incentives
The budget allocates resources to reduce employer costs when hiring young people, women in vulnerable situations, and workers in southern Italy. Permanent contracts signed in 2026, or conversions from temporary to permanent contracts, will have reduced contributions for up to 24 months. The criteria will be detailed by a decree from the Ministry of Labor.
