Expansion Of Italy’s 7% Pensioners’ Tax Regime

Many of you will recall that in 2019 Italy introduced a preferential tax regime for pensioners taking up residency in certain areas of Southern Italy.

Over the years there have been a few tweaks made to the rules, but these have generally had the effect of making it more accessible (unlike what has happened to some other tax regimes available for new residents).

Recently, a further change has been made to the regime by raising the population ceiling for eligible municipalities from 20,000 to 30,000 inhabitants, thereby opening up a broader range of towns across the eligible regions of Southern Italy.

What the regime offers

Qualifying individuals pay a flat 7% substitute tax on all foreign-source income, in place of ordinary progressive IRPEF rates. They are also exempt from the IVIE and IVAFE wealth taxes on foreign assets and are relieved of the foreign asset monitoring obligations that would otherwise apply in the RW schedule of their Italian tax return.

Who can qualify

The core requirements remain unchanged. The applicant must hold a pension paid by a foreign entity, must have been tax resident outside Italy for at least five consecutive tax years prior to the year in which the option takes effect, and must be moving from a country with which Italy has an administrative cooperation agreement in place. The regime covers only income considered to be produced abroad.

Geographically, the transfer must be to a municipality in Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise or Puglia, or to certain municipalities affected by the 2009 or 2016 earthquakes. The population of the chosen municipality — assessed using ISTAT figures as at 1 January of the year before the option first applies — must not exceed the new 30,000 threshold.

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.