The 7% Tax Regime For Pensioners In Italy

Since 2019 Italy has been running a special tax regime of only 7% tax for pensioners (anyone drawing a retirement income) if they relocate to the Southern states of Italy. (Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise or Puglia – or to certain areas affected by the 2009 or 2016 earthquakes)

The regime pensionati was always limited to towns/ cities, which had less than 20000 registered residents. However, from April 7^th 2026 it is extended to towns /cities with up to 30000 residents, which extends the number of possible towns/cities to which you could locate and more importantly have access to important services such as hospitals, medical services, shopping and sports facilities etc.

According to the Italian statistics agency (ISTAT), the majority of comuni in the southern states in this tax regime have less than 30000 inhabitants. IN fact, if we look at how many have more than 30000 residents, the numbers are more startling:

Sicilia (Sicily): 30–35

Campania: 30–35

Puglia (Apulia): 25–30

Sardegna (Sardinia): 8–10

Calabria: 7–8

Abruzzo: 8–10

Molise: 0 (Only Campobasso and Termoli are near or above this threshold historically, but often fall under it depending on current census updates)

Requirements to qualify

1. You must have a pension plan which is held with a foreign company
2. You must have been resident outside Italy for at least the last 5 consecutive tax years before transferring residency.
3. Moving from a country, which has a tax cooperation agreement with Italy.

Important points you need to know!

Whilst this all sounds very exciting, there are conditions to the qualification.

• The pension plan, from which you will draw this income, must have been accumulated from earnings from employment. (self employment or employed work).
• You WILL NOT qualify if you merely add a lump sum of capital into a pension plan before moving to Italy to try to qualify for the tax regime.
• The income that you draw from your pension will be assessed, and whilst there are no specific guidelines, it will need to be sufficient to support your lifestyle in Italy. This will vary from region to region and depending on who is assessing the application. When you make the application, it is best to check with your commercialista at the time.
• The 7% tax is calculated each year on your ‘reddito complessivo’ (cumulative income) NOT just the income from your pension. Reddito complessivo in Italy refers to numerous potential income sources, as follows:

• Income from land or building situated outside Italy.
• Income from capital overseas (dividends, interest etc)
• Income from employed work from outside Italy
• Income from self-employed work where it takes place outside Italy from a fixed place of residence. E.g where you are registered for work purposes in the UK
• Income from businesses abroad.
• Capital gains from the sale of shares in non-Italian resident companies.
• Income from asset held outside Italy.
• Business income generated abroad
• Interest from bank accounts and deposit accounts, national savings and investments and other deposit based savings.
• Capital gains arising from the sale of shares in non-listed companies

Qualifying individuals pay a flat 7% substitute tax on all foreign-source income, in place of ordinary progressive income tax rates. You are also exempt from the property wealth tax and wealth taxes on foreign assets and are relieved of the foreign asset monitoring obligations that would otherwise apply.

Whilst this may seem a relatively straightforward and simple choice, it does make sense to do some careful planning before you apply.

For example, by using ISA’s in the UK, you can potentially realise capital gains before leaving the UK and re-set the clock on future gains. However, timing is important!

In addition, if you do not have assets in ISA’s you may be able to ‘bed and breakfast’ assets in your portfolio before becoming resident in Italy, to reduce capital gains tax liabilities.

You may also be able to make better use of accumulation style investments rather than income distributing to reduce your tax liabilities even further. Why pay even 7 % tax if you can pay zero?

(You pay 7% on capital gains and income ‘realised’ in a portfolio – not just used as income, and so an actively managed portfolio may produce realised, and hence, taxable ‘Italian income’ even if you are not using it for living expenses!!)

If you are a business owner who is looking to retire or sell your business, then you might be able to use the tax regime to reduce your potential tax liabilities.

These are just a few of the possible financial planning considerations that you may need to make.

You will need to plan to get the best benefits from your 7% tax regime tax residency before, during the transition year to Italy and your Italian tax residency itself.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.