Flat Tax for pensioners coming to live in the South of Italy – 10 years at 7%

What does the special tax relief consist of?

A 7% flat tax on all income for all pensioners (regardless of nationality) who:

  • have been tax resident outside Italy for at least five (5) years prior to the year in which they become Italian tax resident;
  • transfer their tax-residence to the defined regions South of  Italy, to a municipality (comune) with a population of fewer than 20,000 inhabitants or to a municipality with fewer that 3,000 inhabitants in defined seismic areas;
  • have previously been resident in a territory with which Italy has in place arrangements for administrative co-operation (which includes any EU member state and a large number of other countries).

Definition of Pensioner

The definition of pensioner in the legislation and guidelines is rather vague. It appears to include anyone in receipt of a pension (government or private), regardless of age, and regardless of whether the pension income is the principal/prevalent source of income. It is certainly wide enough to encompass all forms of pension, private or public. Given the ease in which private pensions products can be purchased in many countries, and given that all foreign income income (pension or otherwise) will be subject to the flat rate 7% charge), the regime looks very attractive. We are awaiting further guidance from the Italian tax authorities to see if the regime covers private, non-occupational pensions payable to persons who are not in receipt of a state pension.


The 7% regime applies for nine (it was initially five when the law was introduced) years starting with the year after the year in which the transfer of tax residence is effective.  Election for the regime is made in the tax return for the year in which tax residence is transferred to Italy. So the total maximum number of tax periods for which the election can apply is ten.

Bear in mind that under Italian rules you are either tax resident in any tax period (calendar year) depending on whether you satisfy the requirements for more than six months in any year.  So if you transfer your tax residence in the latter half of any year, you will not be able to start on the new regime until the following year.  By the same token you should not be liable to Italian tax on non Italian source income at all for that year of transfer.


The regions are: Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise, Puglia.

A list of applicable local authorities can be extrapolated from the web-site of the Italian statistical service ISTAT, but you should check directly with the local authority before moving.

A list of the municipalities in the seismic areas (which also includes municipalities in Umbria and Lazio) can be found in the Annexes to Decree-Law 17 October 2016, no. 189


Timing is important as electing the regime must be done in the tax return for the tax year in which the transfer of residence is completed.  Since, under Italian tax rules, an individual is generally either resident or not for any tax year,  ie. there is no spilt year concept, depending on whether or not the individual is either registered or resident or has their centre of vital interests/habitual abode in Italy for more than half the year, it is important to identify the first tax year in which the regime will start.  Failure to make the election in the first year can lead to loss of entitlement altogether. It is also important to ensure, if possible, that you cease to be liable to tax in the country from which you are moving from the first day of the Italian tax year for which you will be resident, since when you are on the regime you cannot generally claim credit for any foreign tax.

The Consequences of  Making the Election

  • Exemption from income taxes at normal scale rates applicable to pension income and overseas business, employment and rental income;
  • Exemption from 26% substitute tax on investment income/dividends and interest from non Italian companies;
  • Exemption from declaring foreign assets (no need to compile section RW of the return);
  • Exemption from wealth taxes (IVIE and IVAFE) on foreign assets.

The 7% substitute tax means no deductions for tax deductible expenditure or credits (dependents, alimony, energy-saving or real estate refurbishment expenditure etc.)

The regime does not extend to Italian source income on which tax will payable in the normal way ie. subject to marginal rates or applicable other flat-tax rate, such as:

  • rental income on Italian property;
  • income from employment or self-employment where the activity is carried on from Italian territory;
  • deemed land registry income from property in a luxury category or land and buildings generally which are not occupied as the owner’s principal residence property (prima casa);
  • pensions paid by the Italian government/Italian based occupational/private pension schemes;
  • income from Italian government bonds and from Italian listed companies;
  • other investment income paid by an Italian intermediary.

Having Italian source income is no bar to accessing the 7% regime.  It just means that you will need to report that income separately and pay tax on it in the normal way.   For example you will likely need to register for VAT (and social security) is you are carrying an activity of self-employment from Italy.  You are free to make investments in Italian financial investments and products, but, again, you will be liable to tax at normal Italian rates on the relevant income or gains (typically withheld at source by the bank or financial institution).

Foreign Tax on non-Italian income

Under the special regime, you are not able to claim credit for any foreign tax. It seems to be the view of the Italian tax authorities (although specific clarification would be helpful) that the 7% applies to the gross income received and the not the net amount after deduction or payment of any foreign tax.

To overcome the risk of double taxation, the Italian legislator has granted the possibility of opting out of the regime on a country-by-country basis, selecting all income sourced in a particular country, and electing this to be taxed at normal rates.  This you would want to do, if you were liable to tax in that country, and the foreign tax credit covers your Italian tax liability (or gives you an Italian tax liability that is less than 7% of the gross income.)

It should be noted that the exemption from completing Form RW in the tax return and from the payment of IVIE and IVAFE only concerns the jurisdictions included in the option. If you elect to exclude income from a particular country from the 7% substitute tax, then you will need to complete the RW section of the tax return showing opening and year end values for the investments/assets/bank accounts in the country that is excluded from the 7% regime, paying the relevant IVIE and IVAFE.

After the special regime expires

At the end of the flat tax period, absent any extension by the Italian government via new legislation, the taxpayer will go onto the normal regime. This means taxation at ordinary rates/substitute tax on investment income and gains on worldwide income, if still resident.

The flat-tax period can be ended at will by the taxpayer revoking the option, or by moving their residence to another town that does not qualify for the relief.

If any of the requirements for the relief ceases to apply during the period for which the special regime applies, e.g. if the population of the local area grows over 20,000 inhabitants, then the taxpayer will go onto the normal tax regime for the next tax period.

Foreign Pension Income

Note that if you are resident in or have a pension paid by a government or local authority in another country (and one with which Italy has a double tax treaty) and the pension derives from your job with that government or local authority, then you may not be liable to Italian tax at all on that pension income. In this case you may well be liable to tax on the pension income in the country that pays the pension, and you will not be able to properly elect the 7% regime, if your only pension income derives from government service.

Ways we can help

  • Provide an advance report on your resident status and estimate the amount of tax you would be liable to, were you to move to Italy
  • Put you in touch with reliable property consultants you can help you manage the property search,  acquisition and refurbishment process
  • Assist with the legal aspects of purchasing/renting real estate reviewing contracts/purchase deed, acting under power of attorney,
  • Advise on structuring the  acquisition in the most tax efficient manner – especially where you are going to be using the property as part of business activity, advising on best regime taxwise and focussing on tax deductions for refurbishment and improvement costs.
  • Advice on and preparation of wills, planning your succession, managing Italian forced heirship rules, family trusts and optimising inheritance and gift tax.

If you have any questions or would like further information on this regime feel free to contact us

Legislation and Guidance

Art 24-ter of the Italian Tax Code

Agenzia delle Entrate provvedimento n. 167878/2019.

Art 24 III of the Italian Tax Code

Decree-Law 17 October 2016, no. 189 List of municipalities in seismic zones contained Annex 1, 2 and 2(II)

Tax Agency Circular 17 July 2020 No 21/E

Legge 30 December 2018, no. 145 (article 1, para. 274)


4 Comments on Flat Tax for pensioners coming to live in the South of Italy – 10 years at 7%

  1. Hi my name is Richard , I just retired from State government in the US and have a pension and also will start collecting Social Security benefits. I’m thinking of living in Italy. I read your article on foreign income pension, so if I understood I only have to pay my taxes to the US government and not to the Italian Government. is this correct? Thank You.

    • Dear Richard. Yes as a general rule the U/S Italy double treaty provides that pensions received for government service are taxable only in the country that pays the pension, even if you are resident in the other state (Italy).

  2. Hi, My name is Marco. I am currently resident in the UK. Thinking of moving to one of the qualifying comuni this year to take advantage of the 7% tax for pensioners. My concern is that the law applies only up to the end of 2021. and to qualify I will need to move my residence before June the 1st so that I have spent more than 6 months in Italy this year. What happens if I can’t make it so soon (i.e. I move sometime in September )and the new government cancels it?

    • Where did you see that the law only applies up to the end of 2021? The special 7% regime is enacted into art 24 ter of the Italian Tax Code and there is no mention in the Code of the regime expiring at any time. Yes, we have a new Government (nearly) but I have not read of any intention on their part (and it is anyway a bit early) to bring the regime to an end so soon.

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