April 2026 update
The population threshold for eligible municipalities is increased from 20,000 to 30,000 residents. Article 26 of Law No. 34 of March 11, 2026—the SME Law—amends Article 24-ter of the Italian Tax Code by expanding the scope of eligible territories to Comuni (municipal authorities). This amendment opens the 7% Regime scheme to medium-sized urban centers that were previously excluded. This will include larger urban centres, particularly those with better transport connections and urban infrastructure in coastal areas, which have more developed infrastructure compared to small villages. The size extension applies to both municipalities in Italy’s “Mezzogiorno” (Southern Regions) and to earthquake impacted areas in Lazio, Marche and Umbria.
The change is expressed to come apply from 7 April 2026. It is not yet clear exactly when the change will come into effect and in particular whether it will apply to
- anyone registering as resident for the first time in Italy on or after 7 April 2026
- anyone who is tax resident in Italy for FY 2026
- anyone who is tax resident in Italy starting from FY 2027
Before official guidance is issued by the Tax Agency caution should be exercised by those selecting a Comune with more than 20,000 (but less than 30,000) inhabitants transferring tax residence to Italy for FY 2026.
Legislation
In Article 24-ter, paragraph 1, of the Consolidated Income Tax Law, referred to in the Decree of the President of the Republic of December 22, December 1986, No. 917, the words: “20,000 inhabitants” are replaced by the following: “30,000 inhabitants”.
The revised wording of Article 24-bis, now reads:
"individuals who receive pension income as referred to in Article 49(2)(a) from foreign entities and who transfer their residence to Italy pursuant to Article 2(2) to one of the municipalities located in the regions of Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise, and Puglia, or to one of the municipalities listed in Annexes 1, 2, and 2-bis to Decree-Law No. 189 of October 17, 2016, No. 189, converted, with amendments, by Law No. 229 of December 15, 2016, or in one of the municipalities affected by the earthquakes of April 6, 2009, provided that the population does not exceed 30,000 inhabitants, may opt to subject income of any category, generated abroad, identified in accordance with the criteria set forth in Article 165, paragraph 2, to a substitute tax, calculated on a flat-rate basis, at a rate of 7 percent for each tax period during which the option is valid."
What does the special tax relief consist of?
A 7% flat tax on all foreign source (ie. non Italian source)income for all pensioners (regardless of nationality) who:
- are, or will be in receipt of qualifying pension income starting from the first year of Italian tax reisdence and for each Italian tax year that they intend the special regime to apply;
- The said pension income is, or will be, liable to Italian income tax (ie. it will not be exempt from taxation under an applicable DTA)
- have been tax resident outside Italy for at least five (5) years prior to the tax year in which they become Italian tax resident;
- transfer their tax residence for a particular Italian tax (calendar) year to
- one of the Regions in the South of Italy (Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise, Puglia) in a municipality (comune) with a population of fewer than 30,000 inhabitants;
- or to a municipality with fewer than 30,000 inhabitants in defined seismic areas in Marche, Umbria and Lazio;
- transfer their tax residence from a country or jurisdiction with which an administrative cooperation agreement (e.g. a DTA) is in place. This includes any EU Member State, the UK, the US and a large number of other countries).
Definition of Pension
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. However the Italian Tax Agency appear to be developing a restrictive approach excluding from the definition “purchased” pension products i.e.. products which are not workplace related and have not been set up during the taxpayers working life for the exclusive purposes of providing retirement benefits. Pension products containing flexible drawdown arrangements – e.g. where the pensioner is entitled to withdraw all or any part of funds in the pension scheme at any time (possible after reaching the relevant age) also appear in the Tax Agency’s view not to permit, on their own, access to the 7% Regime.
In most cases receipt of state/government retirement benefits will allow access to the Regime. Other types of pension may not meet the definition and will need to be examined in each case.
The pension also needs to be liable to tax in Italy. It is vital to check the terms of the applicable treaty – e.g a double tax treaty or the treaty of the international organisation for which you worked (e.g UN, NATO, EU etc) – as under the terms of the Treaty you may (typically if you worked for government, local authority or an international organisation) be taxable only in the country where your pension provider is based.
Period
The 7% regime applies for ten (it was initially five when the law was introduced) years starting with the year in which the transfer of tax residence is effective. Election for the regime is made in the tax return for that year. This will normally be filed in the year following the first tax year of residence.
Bear in mind that under Italian rules you are either tax resident in any tax period (calendar year) depending on whether you satisfy the statutory residence test for more than 183 days (184 ina leap year, roughly six months) in any Italian tax (calendar) year. So if you transfer your tax residence in the latter half of any year, you will not be able to start on the 7% regime until the following tax 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, assuming you do not fall within the definition of Italian tax resident for more than 183 days (184 days for leap years) in that tax year.
Checking your municipality’s population
A list of applicable local authorities can be extrapolated from the web-site of the Italian statistical service ISTAT, but you should also check directly with the local authority (comune) before moving.
A list of all municipalities in the seismic areas (which also includes municipalities in Lazio, Marche and Umbria (outside the defined Southern Regions ) can be found here. That list also includes municipalities with more than 30,000 so you will need to check the population with the ISTAT service.
Tax Agency guidance states that in determining the population number you make reference to the population number as shown in the Italian statistical service ISTAT lists on 1 January of the year preceding your transfer of residence. What is intended by transfer of residence is not specified, i.e. whether it is the date on which your register as residence with the Anagrafe maintained by your Comune or if it refers to the first whole tax year of tax residence.
Timing
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. Under Italian tax rules, an individual is generally either resident or not for any tax year, ie. there is no spilt year concept /except pursuant to a few tax treaties, eg. the treaties with Switzerland and Germany where applicable), 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. A >183 day (including fractions of a day) additional physical presence test was added with effect from FY 2024 onward. It is therefore of fundamental importance to identify the first Italian tax year in which the regime will start. Failure to make the election in the annual tax return for first year of tax residence and pay the 7% tax by the due deadline will 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.
Otherwise you may face a double tax liability for an overlapping period of residence.
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 (income and gains which are deemed under the Italian Tax Code to have an Italian source) 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;
- investment income and gains paid by an Italian intermediary.
- royalties paid by an Italian business
Having Italian source income is no bar to accessing the 7% regime, as long as you have a qualifying overseas source of pension income. It just means that you will need to report the Italian source 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).
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. It will also terminate, if they move their residence to another municipality 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, then the taxpayer will go onto the normal tax regime for the next tax period.
Foreign Tax on non-Italian source 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.
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.
How We Can Help
We can:
- 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
Art 24-ter of the Italian Tax Code
Agenzia delle Entrate provvedimento n. 167878/2019.
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
Official Guidance
There follows a list of responses to an Interpello – request for official guidance in relation to international pension issues. Not all are relevant specifically to the 7% Regime but they may anyway be of interest.
A former pilot with an occupational pension scheme set up by his former employer cannot transfer the pension capital into a regulated Italian pension scheme. The pension income is liable to “separate taxation” under Italian rules and needs to be disclosed in Section RM XII of the annual tax return.
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An Italian resident citizen with UK State Pension formed principally by voluntary contributions and not directly related to services of employment, is liable to Italian tax in full. These receipts are treated as pension income (art 49 of the Tax Code) and hence liable to Italian at marginal income tax scale rates. The pension payments cannot be treated in the same way as retirement benefits paid by an Italian regulated pension scheme which are exempt from tax for the part that relates to contributions that were not treated as tax deductible.
Availability of 7% flat tax regime under art 24-ter of the Italian Tax code for beneficiary of pensions payable by the U.S. Social Security Administration, by the Service Federal des Pensions – Belgian state social security system, and of a pension paid by INPS, the Italian social security institute. The US SSA and Belgian State pensions qualify as a foreign pensions permitting eligibility for the 7% flat tax regime on the relevant pension receipts, while the INPS pension, being Italian source income, is liable to tax under normal rules applicable to pension income.
Availability of 7% flat tax regime under art 24-ter for a beneficiary of a U.S. individual retirement account “SEPP”.
No eligibility for 7% flat tax regime under art 24-ter of the Italian Tax code for beneficiary of only a pension payable by INPS, the Italian social security institute.
The flat 7% tax regime can apply to a pension paid by a Finnish pension foreign collective pension scheme in view of the social welfare purpose of the scheme aimed at guaranteeing an employee a supplementary pension in the form of regular payments and/or lump sum, once the relevant retirement age has been reached.
Availability of 7% flat tax regime under art 24-ter for beneficiary of a pension paid by the UEB (European Patent Institute) and of a pension paid by INPS, the Italian social security institute. The UEB pension qualifies as a foreign pension permitting eligibility for the 7% flat tax regime, while the INPS pension, being Italian source income, is liable to tax under normal rules applicable to pension income.
No eligibility for 7% flat tax regime under art 24-ter of the Italian Code for beneficiary of two Irish Retirement unit linked Insurance Schemes unrelated to any relationship of employment. Income from the funds cannot be classified as pension income under Italian law.
Non availability of 7% flat tax regime under art 24-ter of the Italian Code for beneficiary of a UK pension (SIPP) set up as a result of a transfer out of an employee occupational pension scheme to a self-invested pension scheme (SIPP). The fact that the scheme is complementary to the UK state social security scheme and that the entire capital can be withdrawn at any moment (flexi draw down) means that income from the fund cannot be classified as pension income under Italian law.
Taxation of UK SIPP – no eligibility for 7% flat tax regime under art 24-ter of the Italian Tax Code. the flexible drawdown characteristics of the SIPP, permitting the pensioner to withdraw funds, income or capital from the fund mean that the income SIPP is not a pension within the meaning of article 49 of the Tax Code. Income from the SIPP is liable to tax at a flat rate of 26%. The drawdown of the original capital contributed is not subject to Italian tax.
Austrian pension paid to a former director of an Austrian company is not a pension for the purposes of Art. 18 of the Italy/Austria Treaty, but falls within the definition of miscellaneous income under Art 21 of the Treaty.
Tax liability of pensions accrued in Italy by an individual resident in Austria. The pensioner was entitled to two pensions payable by INPS (ex INPDAP) and ENPAM (social security scheme for doctors and dentists) in respect of services as an employee (INPS) of Italian national health service entities and as a self employed medical practioner. Classification of pensions under art 18, art 19(2) and 21 of the Italy/Austria double tax treaty. The INPS pension is classifiable as a government service pension under art 19(2), taxable only in Italy, while the ENPAM pension, being a pension due in respect of self employment falls within art 21 of the relevant treaty and taxable only in the country of residence (Austria).
Income tax treatment of a “social security” pension paid by INPS to a taxpayer resident in France. Pension in taxable in both Italy and France by virtue of the particular wording of art 18 of the Treaty between Italy and France and subsequent bilateral arrangements.
Resident of Lithuania in receipt of an old-age pension payable by INPS. Art 18 of the relevant treaty does not apply, since the pension was due in respect of services of self-employment. Art 18 only applies to pension payments in respect of a “past employment”. Since the pension is liable to tax in both countries double taxation should be eliminated by the state of residence granting a tax credit for the Italian tax.
Tax Treatment of pension emoluments received in respect of services previously provided in Italy as a civil servant, by a individual with dual Italian and British nationality and tax resident in the United Kingdom – taxation only in the UK under article 19(2) of the Treaty.
Application of Tax Treaty between Italy and Bulgaria to a pension paid by INPS, deriving from INPDAP. Art 17(2) of the Treaty (government service) not applicable to an Italian citizen resident in Bulgaria. The Italian Tax Agency believe that, for the purposes of the Treaty an individual can only be considered a tax resident in Bulgaria only if they are in possession of the citizenship of that State.
Self-Invested Personal Pension (SIPP) and International Pension Plan (IPP) pension plans – to be treated as pensions, drawdowns liable to income tax at marginal rates. IVAFE exempt.
Article 24-ter regime for foreign pensioners. The Agenzia confirmed that eligibility can exist even where treaty residence issues arise, focusing on the status of the pension and the taxpayer’s Italian residence position. The Tax Agency confirm that the UK pension schemes of which the taxpayer was a member can admit eligibility for the 7% Regime. Each plan was linked to previous employment. This and the fact that the right to receive benefits upon reaching a specific retirement age, means that the schemes in question can be treated as pension schemes for income tax purposes in Italy, given the underlying retirement benefit purpose of the plans, aimed at guaranteeing the employee a supplemental pension in the form of an annuity and/or lump-sum payment in addition to the state pension, once the
age requirement is met.
It concerns Swiss AVS (1st pillar) and LPP (2nd pillar) pensions received by an Italian resident. The Agenzia analysed the Italy–Switzerland treaty and concluded that the pensions were taxable only in Italy under the treaty provisions governing pensions.
The taxpayer qualified for the pensioners’ 7% regime and asked whether an overseas company liquidation distribution fell within the scope of foreign-source income taxable at 7%. The Agenzia answered yes.
It concerns the tax treatment of a redemption (riscatto) from an Italian supplementary pension fund received by a taxpayer resident in Singapore. The Agenzia analysed the Italy–Singapore treaty and concluded that the payment was not treaty pension income but employment income under Article 14 of the treaty, leaving Italy with taxing rights.
Taxability of an ENPAM pension paid to a former physician residing in Luxembourg
Taxation of a pension paid by a French pension fund to a resident of Italy
Taxability of a lifetime annuity paid to a former Italian Regional council member now residing in Tunisia. As these specific receipts are not considered by the Italian relevant legislation to be Italian source income, they are not anyway liable to tax in the hands of a non resident, without the need to check the terms of the specific Treaty.