Retire to a qualifying Italian town and pay a flat 7% on all your foreign income for ten years. We confirm your pension qualifies, choose the right town and handle the election.
Italy offers foreign retirees one of the most attractive deals in Europe: a flat 7% tax on all your foreign income, for up to ten years, if you move your residence to a qualifying town in the south or in the central Italy earthquake areas. Known as the Italy 7 flat tax, it turns retiring to Italy into a genuinely tax-efficient choice, and it is simpler than most people expect.
It is one of three flat tax regimes Italy offers, and the one built specifically for pensioners.
Introduced by the 2019 Budget Law under Article 24-ter of the Italian Income Tax Code (TUIR) and clarified by the Revenue Agency's Circular No. 21/E of 2020, the regime lets eligible foreign pensioners who relocate to a qualifying municipality pay a 7% substitute tax on all of their foreign-source income, regardless of the amount. The tax is final: no progressive brackets and no regional or municipal surtaxes on the income it covers. Against Italy's ordinary rates, from 23% to 43% plus surtaxes, the saving is substantial.
To access the regime you must meet all of the following conditions. Each person elects individually: there is no single family election.
This is where many applications succeed or fail. Italian law has no single tidy definition of pension income, so the Revenue Agency decides case by case, looking at the substance of the payment rather than its label. A pension does not have to be paid in regular instalments: Circular No. 21/E confirms that "pensions of every kind" include lump-sum payments made in consideration of contributions.
Receiving an Italian INPS pension does not bar you from the regime: that income is simply taxed under ordinary rules, while your foreign income enjoys the 7%.
In Ruling No. 184 of 15 October 2026, the Revenue Agency considered the case of a daughter who had become the beneficiary of her late father's US Individual Retirement Account (IRA) and planned to move her tax residence to Italy. It held that the 7% substitute tax also applies to the heir: succeeding to the plan does not change the pension nature of the sums, when they are paid out as periodic payments.
So an heir who inherits a foreign pension plan can use the regime, provided all the other conditions are met: five years of non-residence, a country with a cooperation agreement, and a move to a qualifying town.
For British retirees considering Italy, one question dominates: does a UK Self-Invested Personal Pension (SIPP) count as a pension for this regime? The answer, confirmed by the Revenue Agency in Ruling No. 5/2024, is generally yes. The Agency held that a UK SIPP, and an International Pension Plan, produce pension income under Article 49(2)(a) TUIR, despite their investment-driven structure.
What the Agency looked at were the scheme's pension features: its link to a former working life (including employer contributions and transfers from occupational schemes) and the fact that benefits can be drawn only on reaching pension age. On the UK side, once you are Italian-resident the taxing right over a private SIPP pension generally passes to Italy, and HMRC can be asked to pay your drawdown without UK tax withheld. We handle this analysis for British clients as part of the service.
The 7% applies to all your foreign-source income: foreign pensions, dividends, interest, capital gains, rental income from property abroad and distributions from foreign retirement accounts or trusts. Italian-source income is excluded and remains subject to ordinary taxation.
You may also elect to exclude the income of one or more specific countries from the regime. That can be worth doing where high foreign tax already paid makes ordinary taxation with a foreign tax credit cheaper.
A widespread misconception is that the regime covers only the deep south. In fact it covers two distinct groups of municipalities, and the population ceiling for southern towns was raised from 20,000 to 30,000 inhabitants by Law No. 34/2026, in force from 7 April 2026, opening up dozens of mid-sized towns.
The relevant figure is the ISTAT population as at 1 January of the year before you move, and it stays fixed for your full ten years even if the town later grows. You may also move between qualifying towns without losing the regime.
The regime covers towns below the population threshold in eight southern regions: Abruzzo, Molise, Campania, Puglia, Basilicata, Calabria, Sicily and Sardinia. This is by far the largest group and it includes some of Italy's best-loved destinations: baroque Noto and Scicli in Sicily, the trulli of Alberobello and the white towns of the Valle d'Itria in Puglia, Tropea on the Calabrian coast, and countless coastal and inland villages across Sardinia and Campania. Lower cost of living, a mild climate and established international communities make the south the natural first choice for many retirees.
Less well known, and frequently missed even by advisors, the regime also extends to municipalities in central Italy struck by the 2009 and 2016 earthquakes, across Lazio, Umbria, Marche and parts of Abruzzo. For this group the population limit is much lower, so in practice it covers small villages such as Amatrice and Accumoli in Lazio, Preci in Umbria, and Visso and Ussita in the Marche. They sit closer to Rome and to major road and rail links, in mountain and countryside settings that are less crowded and, for some, more authentic.
Choosing between the two groups shapes not just your tax position but your access to healthcare, transport and airports. It is also where mistakes happen: population alone is not enough, and online lists are often out of date. We verify eligibility town by town against current official data, and can help you find the right home.
The regime runs for 10 consecutive tax years and cannot be extended. When it ends, your foreign income returns to ordinary worldwide taxation if you remain resident. It is lost early if you move to a non-qualifying town or fail to pay the tax on time, and once lost or revoked it cannot be reinstated.
A common and costly misunderstanding: the 7% regime does not exempt you from Italian inheritance and gift tax. Unlike the lump sum tax for high-net-worth individuals, which shelters foreign assets from Italian succession tax, the pensioners' regime carries no such benefit. If succession planning matters to you, it should shape your strategy from the outset, and we address it through our inheritance tax planning service.
The steps are straightforward, but the deadlines are strict and missing them can cost you the regime. If you move in 2026, you elect in your 2026 return and pay by 30 June 2027.
A practical planning point: moving after 2 July usually keeps you from being resident for that calendar year, giving you a cleaner start the following year, one of several timing questions we handle through our Entry Strategy service.
If you pay on time but forget the formal election in the return, the position can usually be saved through the remissione in bonis procedure, by electing in the first available return and paying a fixed €250 penalty. A useful safety net, but not one to rely on. We manage the calendar for you.
Take a retiree with a foreign pension and other foreign income totalling €60,000 a year. Under ordinary Italian rates the tax would be around €18,000 of national IRPEF, more once regional and municipal surtaxes are added. Under the 7% regime the same income costs €4,200: a saving of well over €13,000 every year, for up to a decade, on top of the exemption from foreign-asset reporting and wealth taxes.
A pension is often taxable, in principle, both where it arises and where you live. Which country actually taxes it is settled by the double tax treaty between Italy and the source country, and the answer varies by type of pension. Private and occupational pensions are often taxable only in the country of residence, while some government-service pensions remain taxable only in the source country. Reading the treaty correctly, and completing the paperwork to stop tax being withheld at source, is essential to make the regime work in practice.
American retirees remain subject to US federal tax on their worldwide income wherever they live. The 7% regime discharges your Italian tax, not your US tax, and the two must be coordinated through the Italy-US treaty and the foreign tax credit. US Social Security has its own treaty treatment. We plan this alongside your US advisors.
The two regimes are easy to confuse but serve different people. As a rule: if your income is a pension, the 7% is almost always the better route; if it is large investment or business wealth, the lump sum tax is usually the answer.
EU citizens can move freely. Non-EU retirees, including Americans, Britons, Canadians and Australians, will usually need the Elective Residency Visa, designed precisely for those living on stable passive income such as a pension. We coordinate the visa, the residence registration and the tax election so the whole move fits together.
The eligible towns sit in some of Italy's most beautiful and least hurried corners, where the cost of living is low, the pace is gentle and the welcome is warm. For many of our clients the tax saving starts the conversation, but the life settles the decision.
Avv. Marco Mesina, a member of the Milan Bar (Ordine degli Avvocati di Milano) and formerly of Deloitte and Withers, has guided many foreign retirees through the 7% regime: from confirming that a particular pension qualifies and choosing a compliant town, to the residence registration, the visa and the annual election. In a regime where the wrong town or a misread pension can cost the whole benefit, that experience is what protects your retirement.
No. The 7% covers foreign-source income only. An Italian INPS pension is taxed under ordinary rules, but receiving one does not stop you from using the regime for your foreign income.
Yes, in the right conditions. In Ruling No. 184 of 15 October 2026 the Revenue Agency confirmed that an heir receiving periodic payments from an inherited US IRA can apply the 7%, if all other requirements are met.
Each person elects individually and must meet the conditions on their own, including receiving a qualifying foreign pension. There is no family election as under the lump sum tax.
Nothing. The ISTAT figure is fixed at 1 January of the year before you move and applies for your full ten years.
No. Ordinary Italian inheritance and gift tax applies. Only the lump sum tax for HNWIs offers succession-tax relief on foreign assets.
Yes: by moving to a non-qualifying town or missing the payment deadline. Once lost it cannot be restored, so the calendar matters.
Avv. Marco Mesina
Founder, Move to Dolce Vita · Avvocato, Milan Bar (Ordine degli Avvocati di Milano)
Marco is an Italian tax lawyer who advises individuals and families relocating to Italy on tax regimes, residency, citizenship, real estate and succession planning. Before founding Move to Dolce Vita he worked at Watson Farley & Williams, Withers and Deloitte in Milan.