Italian Tax Credit Update: Revenue Agency Provisions – February 2026

Italian companies investing in the country’s southern regions are poised to benefit from an extension of a tax credit program, with updated rules taking effect January 1, 2026. The extension, formalized by a directive issued January 30, 2026, aims to stimulate economic growth within the Zona Economica Speciale (ZES) Unica – the Single Special Economic Zone for Southern Italy.

Originally established under Article 16 of Decree-Law No. 124 of September 19, 2023, the tax credit has been prolonged through December 31, 2028, as outlined in Law No. 199 of December 30, 2025 (the 2026 Budget Law). The ZES Unica encompasses regions eligible for specific EU state aid derogations, including Basilicata, Calabria, Campania, Molise, Puglia, Sardinia, and Sicily, as well as regions of Marche, Umbria, and Abruzzo.

A key change accompanying the extension is the elimination of the “vacatio” period – a previous gap between legislation and implementation. The tax credit now applies to investments made throughout the entire calendar year, from January 1st to December 31st, of each year. This streamlined approach is designed to encourage more immediate investment decisions.

The program operates under a tiered spending limit. A total of €2.3 billion has been allocated for 2026, followed by €1 billion for 2027, and €750 million for 2028. This phased allocation suggests a deliberate strategy to monitor the program’s effectiveness and adjust funding levels accordingly.

Companies seeking to utilize the tax credit must follow a two-step notification process with the Italian Revenue Agency. First, they must submit a preliminary communication outlining planned and incurred expenses. This initial notification window for 2026 will be open between March 31st and May 30th. Failure to submit this initial notification will result in forfeiture of the incentive.

Following the initial notification, companies must submit a supplementary notification between January 3rd and January 17th of the following year, certifying the completion of the investments and specifying the amount of tax credit accrued. This supplementary notification must be accompanied by relevant electronic invoices and certification details as outlined in a decree issued on May 17, 2024.

The Italian Revenue Agency is expected to publish the percentage of allocation for the tax credits by January 27th of the following year. This publication will provide clarity to investors regarding the available funding and allow for more informed investment planning.

Separately, changes have been made to Italy’s lump sum tax regime. The 2026 Italian Budget Law raises the annual substitute tax under the regime to €300,000 for the main applicant and €50,000 for dependent applicants. However, this increase applies only to individuals who move their tax residence to Italy on or after January 1, 2026. Taxpayers who established residency by December 31, 2025 are grandfathered and remain subject to the previous lower tax rates of €200,000 and €25,000 respectively.

This grandfathering provision, following a similar increase in 2024, underscores the Italian government’s commitment to stability for existing residents. The lump sum tax regime continues to be attractive for high-net-worth individuals (HNWI) and ultra-high-net-worth individuals (UHNWI), particularly for scenarios involving pension withdrawals, carried interests, and estate planning.

The combination of the ZES tax credit extension and the adjustments to the lump sum tax regime signals a concerted effort by the Italian government to attract investment and skilled individuals to the southern regions of the country. The success of these initiatives will likely depend on the efficient implementation of the notification processes and the clarity of the allocation percentages announced by the Italian Revenue Agency.