Portugal versus Italy: IFICI activity relief, or Italy's lump-sum substitute tax.

About Taxbordr: founder-led PT vs IT analysis since 2022

Taxbordr is a Portugal tax advisory firm founded by Telmo Ramos in 2022, Ordem dos Economistas Cédula nº 16379, formerly KPMG Luxembourg and EY Lisbon. We model PT versus IT decisions for HNW families, founders, and asset-rich families considering Lisbon, Porto, the Algarve, Milan, Florence, Rome, or the Italian South. The deliverable is a written Position Memo signed by Telmo, with side-by-side regime, capital gains, wealth, inheritance, and exit-cost lines. The Italian-side numerical positions are coordinated with Italian counsel where the case warrants.

Italy's lump-sum substitute tax: three vintages

Italy's neo-residenti regime under Article 24-bis TUIR taxes foreign-source income at a fixed annual fee that replaces the ordinary tax on that income, for up to 15 fiscal years. The fee depends on the date the resident transferred to Italy:

€100,000 per year for transfers before 11 August 2024.

€200,000 per year for transfers from 11 August 2024 to 31 December 2025, under DL 113/2024 / Law 143/2024.

€300,000 per year for transfers from 1 January 2026 under the Italy 2026 Budget Law.

Each qualifying family member adds €25,000 (lifted from the original €25,000 in some recent drafts; check the 2026 enactment).

The fee covers foreign-source income only. Italian-source income remains taxed under the ordinary IRPEF regime and bands. Italian-source dividends, capital gains on Italian assets, and Italian real estate are outside the fee. The election is filed annually, and the regime can be revoked.

IFICI: a different mechanism

IFICI under EBF art 58-A taxes qualifying Cat A and Cat B Portuguese-source income at 20 percent flat for 10 consecutive years. Foreign-source Cat A, B, E, F, and G income is exempt under CIRS art 81 n.º 4. Pensions and blacklisted-jurisdiction income are not exempt. The math is structurally different from Italy's regime: IFICI is for Portuguese-tax-resident workers earning income in qualifying activities, while the Italian lump-sum is for Italian residents shielding foreign-source income at a flat fee.

When Italy's lump-sum beats IFICI

The Italian fee makes sense above a foreign-source income breakpoint where the fee plus Italian-source ordinary tax beats the alternative. Below the breakpoint, IFICI's 20 percent on qualifying activity plus the foreign-source exemption is usually cheaper. The 2026 €300,000 fee, plus €25,000 per family member, sets the breakpoint roughly between €1.5 million and €2 million of annual foreign-source income depending on family structure. Capital-gains profile changes the answer: Italy's lump-sum covers foreign capital gains, including those on substantial shareholdings (subject to the anti-abuse exclusion for shareholdings disposed of within the first 5 years), while IFICI does not cover all foreign capital gains uniformly. For a founder selling a UK or US holding, Italy can be materially better in the disposal year.

Italy 7% pension regime (Southern Italy)

Italy also offers Article 24-ter TUIR, a 7 percent flat tax on foreign-source income for retirees who relocate to a Southern Italy commune below 20,000 inhabitants. The regime applies for 9 fiscal years (year of arrival plus 8). It is not a substitute for the lump-sum; eligibility is geographic and pension-income-based. For a UK or US retiree comparing Portugal IFICI (which excludes pensions) versus Italy 7%, the Italian regime is usually cheaper unless the retiree wants Lisbon, Porto, or the Algarve as the base.

Capital gains: where Italy can edge out Portugal

Italian-resident investors under the lump-sum regime pay the fee on foreign-source capital gains, with the 5-year anti-abuse exclusion for shareholdings disposed within the first 5 years of residency. Outside the regime, Italy taxes capital gains at 26 percent for non-qualifying participations and at progressive IRPEF rates for qualifying participations. Portugal taxes securities at 28 percent under CIRS art 72, with post-2024 graduated relief of 10/20/30 percent for listed-securities holdings of 2-5 / 5-8 / 8+ years. Real estate gains in Portugal run on 50 percent inclusion at CIRS art 43.2 progressive rates. For a founder sitting on a 10x position, Italy's lump-sum regime can shield gains entirely (subject to the 5-year holding rule).

Wealth and inheritance

Italy applies IVIE (1.06 percent on foreign property) and IVAFE (0.20 percent on foreign financial assets) annually. Italian inheritance tax under DLgs 346/1990 runs 4 percent for spouse / direct family with a €1 million per heir threshold, 6 percent for siblings (€100,000 threshold), and 8 percent for unrelated heirs. Portugal has no wealth tax (only AIMI on Portuguese real estate). CIS art 6 alínea e) exempts spouse / descendants / ascendants from Imposto do Selo on inheritances. For multi-generational wealth planning, Portugal's family exemption can be decisive.

Corporate tax

Italy applies IRES at 24 percent plus regional IRAP. Portugal applies IRC at 17 percent under CIRC art 87 (Lei 64/2025), with SME relief at 15 percent on the first €50,000 per CIRC art 87(2). For owner-managers, the IRC differential matters but should be modelled alongside dividend distribution mechanics, IRC tributação autónoma, and IFICI-IRC interactions.

The framework for choosing

The decision usually turns on three factors. First, foreign-source income volume: above €1.5 million annual foreign income (with a couple of family members), Italy's lump-sum often wins. Second, capital-gains profile: a founder expecting a 9-figure exit may prefer Italy's lump-sum disposal shield. Third, family-transfer plans: Portugal's CIS art 6 alínea e) family exemption is structurally cleaner than Italy's tiered inheritance-tax regime. Lifestyle considerations are real but secondary to the math.

What this guide is not

This page is general guidance, not advice on your specific situation. The Italy-side numerical positions are simplified for comparative reading and would be confirmed by Italian counsel before any decision is acted on. The Italian 2026 Budget Law text controls the €300,000 vintage; check official publication before relying on the figure.