What Is the Italian 7% Pensioners Tax Regime?

The Italian 7% flat tax regime was created to attract foreign retirees to relocate to southern Italy. It offers favorable tax treatment on foreign-sourced income, including pensions, interest, and dividends. Retirees moving to Italy can pay a flat 7% tax on foreign income instead of the standard progressive tax rates, which can go up to 43%.

This regime supports economic growth in southern regions, encouraging financial investments and international connections.

Eligibility Criteria for the Italian 7% Tax Regime for Pensioners

Foreign Pension Requirement

  • To qualify for the Italian 7% pensioners tax regime, the individual must receive a foreign-sourced pension. Only pensions paid by non-Italian entities qualify.

Residence in Designated Areas

  • The individual must relocate to specific regions in southern Italy, which include:
    • Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise, and Puglia.
  • They must live in a municipality with a population of no more than 20,000 inhabitants.

Extended Towns for Relocation (Sostegni Ter Decree)

In 2022, the Sostegni Ter Decree expanded the scope of the 7% tax regime. In addition to southern regions, foreign retirees can now move to towns affected by the 2009 L’Aquila earthquake. The population limit of 20,000 inhabitants was also extended to include these towns, such as:

  • Camerino, Matelica, Tolentino, and Norcia.

For relocation purposes, the official population data from ISTAT (published annually) is used to verify the eligibility of the town. This data is relevant for the entire period during which the individual benefits from the regime.

Non-Italian Residency Requirement

  • To qualify, the individual must not have been a tax resident in Italy for the previous five years.

Countries with Tax Treaties

  • The foreign pension must come from a country that has a tax treaty or administrative cooperation agreement with Italy. This helps ensure transparency and compliance.

How the 7% Pensioners Tax Regime Works

Once qualified, individuals benefit from the 7% flat tax on all foreign-sourced income. This includes:

  • Pensions from foreign sources
  • Foreign investment income, such as interest and dividends
  • Foreign rental income
  • Capital gains on foreign assets

Foreign Income Only

The 7% flat tax applies only to foreign-sourced income. Any income generated within Italy will be taxed under the normal progressive tax system.

Key Benefits of the Italian 7% Pensioners Tax Regime

Flat Tax on Foreign Income

  • The 7% flat tax simplifies tax calculations, allowing individuals to pay a fixed rate on foreign income. This is much simpler than dealing with Italy’s progressive tax rates, which can reach 43%.

Duration of the Regime

  • Beneficiaries can enjoy the 7% tax for up to 10 years. This makes it one of the longest-lasting tax incentives in Europe for retirees.

Wealth Tax Exemptions

  • Individuals who opt into the Italian 7% tax regime are exempt from paying the:
    • IVIE (wealth tax on foreign real estate)
    • IVAFE (wealth tax on foreign-held financial assets)

This is particularly advantageous for high-net-worth individuals with substantial foreign assets.

Simplified Reporting

  • Participants are exempt from fiscal monitoring obligations, which usually require Italian residents to report foreign-held assets. This exemption simplifies compliance significantly.

Exclusion of Certain Countries

  • Beneficiaries may exclude income from specific countries from the 7% regime, opting instead for standard taxation. This is particularly useful if the individual wishes to claim foreign tax credits.

How to Apply for the 7% Pensioners Tax Regime

Relocation to a Qualifying Municipality

  • The individual must relocate to one of the eligible regions or towns and register their residency with the Anagrafe (residents registry).

Tax Return Declaration

  • The option to benefit from the 7% flat tax must be declared in the individual's annual tax return for the year in which they relocate. Foreign income must be disclosed, and the 7% tax treatment applied.

Tax Payment

  • The 7% tax is paid annually, in one installment, as part of the tax return process. The payment deadline aligns with Italy’s standard tax payment deadlines.

Revocation and Cessation of the 7% Regime

Revocation

  • Individuals may opt out of the regime by notifying the Italian tax authorities through their tax return. Once revoked, the individual cannot re-enter the regime.

Automatic Termination

  • The regime terminates if the individual no longer resides in an eligible town or fails to meet other criteria, such as missing the flat tax payment deadline.

Special Considerations for the 7% Pensioners Tax Regime

Death of the Beneficiary

  • If the individual passes away during the regime, the heirs may continue to benefit from the regime for the remainder of the year, provided the relevant taxes are paid.

Non-Pension Income

  • In addition to pensions, the regime covers all foreign-sourced income, including investment income, rental income, and capital gains.

Why Italy’s 7% Pensioners Tax Regime Is Ideal for Foreign Retirees

The Italian 7% pensioners tax regime is an attractive option for foreign retirees who want to enjoy the beauty of southern Italy while benefiting from substantial tax savings. With its flat tax, wealth tax exemptions, and long-term duration, it is one of the best tax incentives available in Europe. Retirees looking to simplify their tax affairs while enjoying life in Italy should consider this regime.

Move to Dolce Vita: Your Trusted Partner for Tax and Legal Assistance

If you’re planning to move to Italy and want to explore the 7% pensioners tax regime, Move to Dolce Vita can help. We provide a preliminary analysis of your case, assistance with your tax return, and ongoing tax and legal consultation. Contact us today for comprehensive support and guidance.

‍

‍