Expanded flat tax for foreign pensioners in Italy: what changes in 2026

Starting from April 7, 2026, the preferential tax regime for foreign pensioners has been significantly expanded, strengthening Italy’s attractiveness as a destination for those receiving pension income from abroad. The main change concerns the increase in the population threshold of eligible municipalities in Southern Italy, which rises from 20,000 to 30,000 inhabitants, allowing access to the benefit also for larger urban centers.

The amendment, introduced by Law No. 34 of March 11, 2026, modifies Article 24-ter of the Italian Income Tax Code (TUIR) and affects eight southern regions—Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise, and Puglia. The practical effect is the inclusion of locations that, while not large cities, offer more developed infrastructure, better transport connections, and a wider range of services compared to the smaller municipalities previously eligible. This aspect represents a decisive factor for many non-EU pensioners who consider not only the tax advantage but also quality of life when deciding whether to relocate to Italy and apply for a visa and residence permit (in many cases, for example, elective residency).

From an operational standpoint, the regime remains largely unchanged. The substitute tax continues to be set at 7% and applies to all foreign-source income, including not only pensions but also financial and investment income such as interest, dividends, rents, and capital gains. Income generated in Italy remains subject to ordinary taxation. The option lasts for a maximum of nine years and can be exercised in the tax return for the year in which tax residency is transferred.

The access requirements remain strict but clear: the taxpayer must receive a pension paid by a foreign entity, must not have been tax resident in Italy during the previous five tax years, and must transfer their residence to one of the eligible municipalities, coming from a country with which Italy has administrative cooperation agreements in tax matters. This last element is essential to ensure transparency and traceability of foreign income.

An often relevant consideration concerns the comparison with other tax regimes available in Italy, particularly the one for new residents with high net worth, which provides for a flat annual tax of €300,000 on foreign income. The choice between the two mainly depends on the level and composition of income: the 7% flat tax tends to be more advantageous for low-to-medium or moderate incomes, while the lump-sum regime may be more efficient for very high and highly diversified wealth.

The 2026 expansion does not affect existing positions: those who joined the regime before the reform continue to benefit from it until its natural expiration, without any negative impact. The new measure therefore operates exclusively in an expansive sense, increasing the number of potential beneficiaries.

Overall, this regulatory development is part of a broader strategy aimed at counteracting depopulation in certain areas of the country and stimulating local economies by attracting new residents with spending capacity. Extending eligibility to municipalities with up to 30,000 inhabitants represents a balance between tax incentives and territorial sustainability, making the regime not only more accessible but also more aligned with the practical needs of those choosing to relocate to Italy.

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The content of this article is intended to provide general information on the topic. For doubts or specific cases, it is advisable to seek specialized legal advice tailored to your particular situation.

Article written by Alessia Ajelli, Managing Associate of LCA Studio Legale, Italian lawyer specialized on Italian immigration and citizenship law, and Paolo Grassi, Trainee of LCA Studio Legale.