Introduction

Italy’s 7% tax regime offers foreign retirees a unique opportunity to relocate to select municipalities in Southern Italy and pay a flat 7% substitute tax on all foreign-source income. Introduced by Article 24-ter of the Italian Income Tax Code (TUIR), this regime is designed to attract pensioners from abroad by offering a simplified tax model, limited compliance obligations, and a low tax burden for up to 10 consecutive years.

This guide outlines the eligibility criteria, scope of income covered, geographical requirements, how to apply, and the key benefits and limitations of the regime.

What Is the 7% Tax Regime?

The 7% regime is a substitute tax regime introduced by Italy’s Budget Law 2019 and later clarified by Agenzia delle Entrate Circular No. 21/E of 17 July 2020. Eligible individuals who relocate to a qualifying municipality and receive a foreign pension may opt to pay a flat 7% tax on all of their foreign-source income, regardless of the total amount.

The tax is final: no progressive rates, no additional tax brackets, and no further taxation on the income covered.

Key Benefits

  • Flat 7% tax on foreign-source income
  • Valid for 10 tax years
  • No IVIE/IVAFE (wealth taxes on foreign assets)
  • No reporting of foreign assets (no RW section filing)
  • Reduced compliance with a simplified tax return
  • Available to individuals not previously tax resident in Italy for 5 years

Important clarification: The 7% regime does not include any exemption from inheritance or gift tax. Italian inheritance and gift tax rules apply as normal to all individuals resident in Italy, regardless of tax regime.

Who Can Qualify?

To qualify, the individual must:

  • Receive a foreign pension (public or private)
  • Have been tax resident outside Italy for at least five years before relocation
  • Transfer tax residency to an eligible Italian municipality
  • Have been resident in a country with an administrative cooperation agreement with Italy (e.g. EU, USA, UK, Canada, Australia)

What Income Is Covered?

The 7% flat tax applies to all foreign-source income, including:

  • Foreign pension income
  • Dividends, interest, and capital gains from non-Italian investments
  • Rental income from properties located outside Italy
  • Trust distributions or proceeds from foreign retirement accounts
  • Insurance or private annuity income from abroad

Italian-source income is excluded and subject to ordinary progressive taxation.

Eligible Municipalities

The regime is limited to individuals who establish tax residency in qualifying municipalities.

Criteria:

  • Located in Southern Italy (Abruzzo, Molise, Campania, Puglia, Basilicata, Calabria, Sicily, or Sardinia)
  • Have a population of less than 20,000 inhabitants, based on ISTAT data as of January 1 of the year preceding the tax year in which the regime is applied
  • OR be among the municipalities affected by the 2009 L’Aquila earthquake, now also included thanks to DL 4/2022

The ISTAT population figure remains valid for the full 10-year regime period unless the taxpayer moves to another municipality.

Duration of the Regime

  • The regime lasts for 10 consecutive years
  • It cannot be extended beyond that
  • The regime is lost if the taxpayer moves to a non-eligible municipality
  • The taxpayer can voluntarily opt out at any time via their tax return

How to Elect the Regime

To activate the 7% regime, the taxpayer must:

  1. Become an Italian tax resident in a qualifying municipality
  2. Elect the 7% regime in the first annual tax return (Modello Redditi) after relocation
  3. Pay the 7% tax by June 30 of the year following the tax period (no installment plan available)
  4. Maintain compliance for all years of the regime

Example: If you move to Italy in September 2025, you must elect the regime in your 2026 tax return (for tax year 2026) and pay the substitute tax by June 30, 2027.

When the Regime Ends or Is Lost

The 7% regime automatically ends:

  • After 10 tax years
  • If the taxpayer moves to a non-qualifying municipality
  • If the taxpayer fails to pay the tax on time or omits the election in the tax return
  • If the Italian Revenue Agency finds that eligibility requirements were not met

Once lost or revoked, the regime cannot be restored.

Common Mistakes to Avoid

  • Selecting a town that does not meet ISTAT population thresholds
  • Assuming Italian pensions or foreign income taxed only in Italy qualify
  • Moving to Italy and failing to register as resident with the Anagrafe
  • Believing the regime includes exemption from succession or gift tax
  • Missing the tax filing deadline or forgetting to elect the regime

Strategic Considerations

  • Consider moving after July 2 to avoid being resident in Italy for that calendar year, if needed
  • Always check the ISTAT population data before choosing a municipality
  • Keep documentation of pension source, previous residency, and registration in the municipality

Final Notes

The 7% tax regime is not only a tax incentive—it’s a lifestyle opportunity. With proper planning, it offers:

  • Simplicity and tax certainty
  • Predictable annual tax burden
  • Freedom from complex asset reporting
  • A welcoming environment for retirement in charming Italian towns

But it must be handled carefully—especially in terms of eligibility, timing, and reporting. A wrong step (wrong town, wrong filing) can make you ineligible or expose you to audit and penalties.

How Move to Dolce Vita Can Help

At Move to Dolce Vita, we provide full support to foreign retirees considering a move to Italy.

We offer:

  • Pre-relocation tax and municipality eligibility analysis
  • Support with immigration, residency registration, and Anagrafe filing
  • Election of the 7% regime in your tax return
  • Ongoing tax compliance and strategic planning
  • Clarifications on international pension taxation and treaty application

Led by Italian tax lawyer Marco Mesina, we help you relocate with confidence and peace of mind.

Start Your Italian Retirement Smart

Thinking about moving to Italy with a foreign pension? The 7% regime could transform your retirement plans—if you apply it correctly.

Want to check if your town qualifies?
Need to confirm your pension eligibility under treaty rules?
Want your tax return handled professionally?

Contact us today.

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