7% Flat Tax for Foreign Pensioners

Overview

Under Article 24-ter of TUIR (the Italian Income Tax Code), foreign pensioners and individuals with foreign-source income who move to qualifying small Italian towns can pay a flat substitute tax of just 7% on ALL foreign-source income for up to 10 years. This replaces the standard progressive tax rates, which can reach up to 43%.

Eligibility

• Must receive foreign-source income (pensions, investments, rental income, etc.)
• Must not have been an Italian tax resident for the previous 5 tax years
• Must establish residence in a municipality with a population under 20,000 in a qualifying region
• Must come from a country that has an administrative cooperation agreement (tax treaty) with Italy

Qualifying Regions

The 7% flat tax is available to those who establish residence in municipalities located in the following areas:

• Southern Italy (Mezzogiorno): Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise, and Puglia
• Earthquake-affected areas: Qualifying municipalities in Central Italy that were impacted by seismic events

Duration

The 7% flat tax regime is available for up to 10 years (the first year plus 9 following years). Taxpayers can revoke the election at any time and switch to ordinary progressive taxation.

Benefits

• 7% flat rate replaces progressive income tax rates of up to 43%
• Exemption from IVIE (tax on foreign-held real estate)
• Exemption from IVAFE (tax on foreign financial assets)
• Exemption from RW Form (Quadro RW) foreign asset reporting requirements

Healthcare

Enrollment in Italy's national healthcare system (Servizio Sanitario Nazionale / SSN) is available to residents under this regime, but requires a separate assessment of healthcare contribution obligations. Your specific situation will determine whether additional payments are needed for full SSN coverage.

Property

You can purchase property in your qualifying town, but property ownership is not required to participate in the program. Renting a home in a qualifying municipality is sufficient to establish the required residency.

Ideal For

• Retirees receiving foreign pensions who want to enjoy the Italian lifestyle at a low tax rate
• Individuals with investment or rental income from abroad
• Those seeking an affordable Mediterranean lifestyle in charming, historic small towns

Visa Compatibility