How Italian tax works for a retiree — and the 7% flat regime that changes the maths entirely. Written to be understood, not to impress.
When you move to Italy and register as a resident — broadly, once Italy is your home for more than half the year — you become an Italian tax resident. From that point Italy can tax your worldwide income under the ordinary rules.
That sounds heavy, and under the ordinary system it can be: Italian income tax (IRPEF) is progressive and rises in steps to around 43% on higher incomes, with small regional and municipal add-ons. The good news for retirees is that you usually won't be on the ordinary system at all.
Introduced by Article 24-ter of the Italian tax code, this regime lets someone with a foreign pension who moves to a qualifying southern town pay a flat 7% on all their foreign income — pension, Social Security, dividends, capital gains, rents — for the year of the move plus the following nine (up to ten years in total).
It replaces ordinary income tax on that foreign income and, just as importantly, it simplifies foreign-asset reporting and lifts Italy's wealth taxes on your assets abroad. For a retiree with a home and savings back home, that's often the biggest saving of all.
Four conditions, in plain terms.
You receive pension income from a foreign source — US Social Security qualifies.
You were not an Italian tax resident in the five tax years before your move.
You move from a country with a tax-cooperation agreement with Italy — the US, UK, Canada, the EU and many more.
A town under 30,000 residents in the South, or a Central-Italy seismic-area municipality. See all 2,534 →
Italian residents normally pay small annual wealth taxes on foreign property (IVIE) and foreign financial assets (IVAFE), and must declare those assets each year on the quadro RW of their tax return.
Under the 7% regime these obligations are lifted for the income and assets covered — no wealth taxes and no yearly asset-reporting on your holdings abroad. It's a quiet but powerful part of the deal.
Exactly how your pension, Social Security and investments are treated depends on the tax treaty between Italy and your home country and on your own circumstances. The 7% regime sits on top of those treaty rules.
If you're American, there's more to coordinate — you keep filing in the US. We walk through it on the dedicated guide for US retirees, and we set it up properly for your case.
On your foreign income, yes — a flat 7% substitute tax for up to ten years, instead of ordinary Italian income tax. Italian-source income is taxed normally.
It's the section of the Italian tax return where residents declare foreign assets. Under the 7% regime you're relieved of it for your covered assets.
The year you move plus the following nine — up to ten years in total.
Often yes, especially as a US citizen. The treaty is built to prevent paying twice on the same income; we coordinate the two sides.
In towns under 30,000 residents across the South, plus Central-Italy seismic-area towns. Explore them on the towns map.
Tell us your situation and we'll confirm whether the 7% regime fits — and handle the Italian side end to end.
Prefer to read first? The whole journey is in Marco's book.