“Pensioners’ Flat Tax” in Italy: regulatory framework and benefits for foreign retirees

In recent years, Italy has introduced a series of measures aimed at attracting new residents from abroad, some of which focus specifically on retirees. Among these initiatives, the preferential “Pensioners’ Flat Tax” regime stands out. It is designed for individuals who receive a pension from a foreign entity and choose to move to Italy, settling in specific areas of the country. This represents a significant tax opportunity that combines administrative simplicity with reduced taxation on foreign-sourced income, while simultaneously promoting the economic development of less populated regions or areas affected by structural challenges.

Legal basis: from the introduction to the current rules

The preferential regime was introduced by Law No. 145/2018 (the 2019 Budget Law) and later refined by the so-called “Growth Decree.” Today, the measure is governed by Article 24-ter of the Italian Income Tax Code (TUIR), which sets out the requirements, application procedures, and duration. Legislators aimed to create a simple yet effective mechanism capable of making Italy a competitive destination in the global landscape of “retirement tourism.”

Eligibility: key requirements

The regime is intended for retired individuals who receive pension income from a foreign entity, whether public or private. To join, one must not have been an Italian tax resident during the five years prior to relocation.
The benefit is also tied to where the individual chooses to settle: the retiree must establish residency in a municipality located in Southern Italy — that is, in regions such as Apulia, Campania, Basilicata, Calabria, Sicily, or Sardinia — or in a central Italian area affected by seismic events, provided that the municipality has no more than 20,000 inhabitants. This territorial requirement is an integral part of the regime’s logic, which aims to support areas often affected by depopulation and limited economic growth.

The Tax advantage: reduced taxation and long-term stability

Once the conditions are met, the retiree may benefit from a 7% substitute tax on all foreign-sourced income. This applies not only to pension income but also to any dividends, interest, rental income, or other earnings of foreign origin, which are taxed on a lump-sum basis rather than under the progressive tax rates normally applied to Italian residents.

In addition to the simplicity of calculation, the regime offers a favorable time horizon: it lasts for nine tax years, and during the entire period beneficiaries are exempt from foreign asset reporting obligations as well as from wealth taxes such as IVIE and IVAFE. The tax must be paid in a single annual installment by the standard deadlines for income tax payments.

Another flexible aspect is the compatibility with any Italian pension benefits: receiving a domestic pension does not exclude the taxpayer from the regime, which continues to apply to foreign-sourced income.

How to opt for the 7% “Pensioners’ Flat Tax”

Accessing the regime does not require a prior application. Instead, the option must be exercised directly in the tax return for the first year of Italian tax residency. The choice is binding for that year but may be revoked in the future should the taxpayer decide not to continue using the regime. At the same time, the individual must indicate the last foreign jurisdiction of residence, information useful to the Italian tax authorities for any verification within the framework of international cooperation.

A measure with targeted economic impact

The “Pensioners’ Flat Tax” is not only a tax incentive: it serves as a strategic tool to stimulate the economic fabric of often-marginalized areas. The arrival of foreign retirees generates new demand for services, real estate investment, and commercial activity, contributing to the revitalization of territories that have experienced declining populations and reduced economic activity in recent decades. The measure, although designed to benefit the taxpayer, also produces widespread advantages for local communities.

Why choose Italy as a new residence

The special 7% tax regime makes Italy an attractive destination for retirees seeking quality of life, fiscal stability, and clear, predictable taxation of foreign-sourced income. The combination of advantageous rules and the country’s inherent appeal — landscapes, culture, and a cost of living often lower than in other European countries — creates an ideal environment for those wishing to spend their retirement in a welcoming and well-regulated setting.

Non-EU citizens considering relocation to Italy to benefit from the “Pensioners’ Flat Tax” should, however, bear in mind that to establish residency they must obtain a national long-stay visa and a residence permit (one particularly interesting option for retirees is the elective residency visa and permit). They must also ensure that all personal requirements are fully met in order to manage the entry into the regime correctly. With proper planning, the “Pensioners’ Flat Tax” can represent a tax-efficient choice and, at the same time, a new beginning in one of the most beautiful regions of the Mediterranean.

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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.