What is 7% flat tax in Italy?
Italy introduced the special tax regime under Article 24-ter of Presidential Decree No. 917/1986 (TUIR), specifically to encourage foreign pensioners to establish their tax residence in certain areas of Southern Italy.
This is a special tax regime, in force since the 2019 tax year, which is available to individuals who are not tax resident in Italy, receive pension income paid by foreign entities, and transfer their tax residence to Italy. The preferential regime allows eligible taxpayers to opt for a substitute tax on foreign-source income instead of being subject to the ordinary Italian tax rules.
More specifically, individuals who were previously non-resident for tax purposes and transfer their tax residence to certain municipalities in Southern Italy may elect to have foreign-source income of any category subject to a 7% substitute tax rate, for a maximum period of ten tax years, starting from the tax year in which the option is first exercised.
The purpose of this legislation is to encourage investment, consumer spending and the establishment of foreign retirees in Southern Italian municipalities located in the regions of Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise and Puglia, with a population of no more than 30,000 inhabitants, by attracting foreign pensioners receiving foreign-source pension income.
As an additional incentive for economic and social development, the legislator has also provided that the proceeds collected through the substitute tax are to be allocated entirely to technical and scientific university centres in Southern Italy, to fund research grants and innovative projects.
Who is eligible for the new 7% tax regime?
Not every foreign retiree can automatically benefit from this tax incentive. Article 24-ter establishes specific requirements that must be satisfied.
In particular, the individual must:
- Receive pension income from a foreign entity, falling within the pension income category identified by Italian tax legislation.
- Transfer their tax residence to Italy.
- The taxpayer must move to Italy from a country with which an agreement on administrative cooperation in tax matters is in force.
- Establish tax residence in an eligible municipality in one of the qualifying Italian regions or in another municipality expressly covered by the legislation.
- Have been tax resident outside Italy for at least five tax years preceding the year in which the option becomes effective.
The foreign pension must also meet the statutory requirements. The fact that a person receives payments from a foreign institution does not, by itself, establish eligibility. The legal nature and source of the pension must be examined.
For this reason, an assessment of the pension documentation and the individual's previous tax residence is advisable before planning the move.
Where are the 7% tax zones in Italy?
The preferential tax regime applies if the taxpayer transfers their tax residence to a municipality located in one of the following Italian regions: Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise or Puglia, provided that the municipality has a population of no more than 30,000 inhabitants (this threshold has been in force since 7 April 2026; previously, the limit was 20,000 inhabitants).
The regime is also available to foreign pensioners who transfer their tax residence to a municipality with no more than 30,000 inhabitants affected by the seismic events of 6 April 2009 (the L'Aquila earthquake) or the seismic events of 2016 (the Central Italy earthquakes – Annexes 1, 2 and 2-bis to Decree-Law No. 186/2016).
To determine the resident population of the municipality to which the taxpayer intends to relocate, reference must be made to the figures published by the Italian National Institute of Statistics (ISTAT) in its annual municipal survey on population movements and calculations, relating to 1 January of the year preceding the first tax year in which the option becomes effective. This population figure remains applicable throughout the entire validity period of the option, provided that the taxpayer does not transfer their residence to another municipality.
The option remains valid even if, from the second tax year onwards, the taxpayer transfers their residence to another eligible municipality, in which case the relevant population figure will be that recorded as of 1 January of the year preceding the year in which the transfer of residence takes place.
How Long Can You Benefit from the 7% Tax Rate?
You can benefit from Italy's 7% flat tax rate for a maximum period of 10 tax years.
It applies to the tax year in which the individual becomes tax resident in Italy and the following nine tax years.
For example, an individual who transfers their tax residence to Italy in 2026 and validly exercises the option may benefit from the 7% substitute tax regime from 2026 through 2035 (inclusive), provided that all statutory requirements continue to be met.
Upon termination of the regime, foreign-source income must be included in the individual's overall taxable income and will be subject to ordinary Italian personal income tax (IRPEF) rules.
Can You Exclude Income from Certain Foreign Countries?
The Italian 7% flat tax regime also offers a degree of flexibility. Under Article 24-ter(8) of the Italian Income Tax Code, eligible taxpayers may choose not to apply the substitute tax to income generated in one or more foreign countries.
In such cases, income from the excluded countries is subject to ordinary Italian taxation, and the taxpayer may claim a foreign tax credit for eligible taxes paid abroad, in accordance with the applicable Italian tax rules and double taxation treaties.
This option may be particularly relevant for foreign pensioners receiving income from multiple countries, as it allows them to assess the most appropriate tax treatment for each source of income.
Does the 7% Flat Tax Apply to All Foreign Pension Income?
The distinction between different types of pension income is particularly important.
The legislation refers to pension income falling within Article 49(2)(a) of the Italian Income Tax Code and paid by foreign entities.
Depending on the country of origin and the nature of the pension, different tax rules may apply.
For example, a foreign retiree may receive:
- A state or public pension;
- A private occupational pension;
- A company pension;
- A personal retirement pension;
- Income from private investments or rental properties abroad.
These income sources should not automatically be treated in the same way.
In particular, public-sector pensions may be subject to specific provisions under the applicable double taxation treaty. Depending on the treaty and the circumstances, the right to tax may remain with the country paying the pension.
Consequently, it is necessary to examine both Italian domestic tax legislation and the relevant international tax treaty before determining whether a particular pension can benefit from the 7% regime.
How to move tax residency?
Moving to Italy involves more than renting or purchasing a property.
To benefit from the 7% tax regime, the individual must effectively transfer their tax residence to Italy in accordance with Italian legislation.
Under the applicable tax residence rules, an individual may be considered tax resident in Italy if, for the greater part of the tax year, taking into account the relevant counting rules, they satisfy one or more of the statutory criteria, including civil-law residence, domicile or physical presence in Italy.
Registration with the Italian municipality's population register (Anagrafe) is also relevant under the applicable rules.
The transfer should be genuine and supported by appropriate documentation.
Depending on the circumstances, the process may involve:
- Obtaining the necessary immigration authorisation or residence permit, where applicable.
- Securing suitable accommodation in Italy.
- Registering with the local municipality.
- Obtaining an Italian tax identification number (codice fiscale).
- Reviewing the individual's previous tax residence and foreign pension documentation.
- Determining whether the chosen municipality qualifies for the special regime.
Foreign nationals should also consider their immigration status separately from their tax position. The right to reside in Italy and eligibility for the 7% tax regime are two distinct legal matters.
How Is the 7% Flat Tax Paid?
The substitute tax must be paid in a single instalment by the deadline established for payment of the balance of income taxes.
The 7% flat tax option must be exercised in the Italian income tax return relating to the tax year in which the individual transfers their tax residence to Italy. The substitute tax must be paid annually in a single instalment by the deadline established for the payment of the income tax balance, using the F24 payment form.
Legal Assistance for Foreign Pensioners Moving to Italy
Moving to Italy after retirement and benefiting from the 7% flat tax regime for foreign pensioners requires careful legal and tax planning. Before transferring your tax residence, it is essential to assess your eligibility, the nature and source of your pension income, the applicable double taxation treaties and the requirements concerning the municipality where you intend to settle.
Foreign retirees should not rely solely on general information about Italy's tax benefits for foreign pensioners. Each situation must be examined individually to ensure compliance with Italian tax legislation and applicable international agreements.
Arnone&Sicomo – International Law Firm provides legal assistance to foreign pensioners, expatriates and international clients planning to relocate to Italy. Our services include preliminary legal assessments of eligibility for the Italian 7% flat tax regime, assistance with transferring tax residence, immigration matters, property investments and coordination with qualified Italian and foreign tax professionals.
If you are looking for an international law firm in Italy, an experienced Italian lawyer for foreigners or professional legal assistance in Italy, contact Arnone&Sicomo – International Law Firm for legal advice and assistance with your relocation to Italy. We can help you understand your rights, assess your legal position and coordinate the necessary steps to make your move to Italy as smooth and secure as possible.
Contact Arnone&Sicomo to discuss your plans and discover how we can assist you with your move to Italy.
