How the 7% Tax in Italy Works
The 7% tax in Italy: who is eligible, where it applies, and how it works in practice.
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Many of my readers dream of retiring in Italy. In fact, some already have.
In my region-by-region series on where to move, the topic of the 7% flat tax for retirees comes up often.
So let’s take the bull by the horns and address how it works, the areas where it applies, and what it means in practice.
The 7% tax regime in Italy is amazing
The short, if imprecise, definition is that the 7% tax regime is an extremely generous fiscal program for foreign people retiring in Italy. If you qualify, you’ll genuinely pay very little tax.
The point of the program is to attract foreign retirees and their money to small comuni (municipalities) in the south and selected towns affected by recent earthquakes in the center of Italy.
In other words, Italy wants to revive areas that are somewhat underdeveloped and would otherwise bleed people, and do so with an influx of money from the outside. It’s an odd choice to aim for retirees rather than young workers, but hey, we are not here to judge. We are here to maximize our resources.
It hasn’t been marketed properly outside of Italy, so the success of the program has been modest at best. A report shows that in 2025, covering the 2024 tax year, only 933 people took advantage of the program.
If you’re curious, Abruzzo has consistently led the program, followed by Puglia and Sicilia. The last breakdown from the ministry was published in 2021, but it shows that Ceglie Messapica in Puglia and Penne in Abruzzo were popular hits (with 7 retirees each, in that year).
The program has mostly attracted British and German pensioners, with the Americans being in a distant third position.
Make no mistake, though: this is an incredible deal in areas where the cost of living is low in the first place. You can legitimately stretch your retirement dollars without the North American (or Oceanic) worries of a skyrocketing cost of living. And doing so in beautiful places, while enjoying nice (if hot) weather and fantastic food.
If it still exists by the time I retire twenty years from now, I’m 100% going for it myself.
Before you get too excited, however, let’s get very specific about everything so that you get the full picture of how the tax regime actually works.
Who qualifies for the 7% tax regime
To qualify for the 7% tax regime, you need to:
Receive a pension from your home country
Not have lived in Italy in the past 5 years
Regarding the pension, you don’t have to be 65. Article 24-ter of the Italian tax code, regulating this program, doesn’t say anything about your age. But it does care that you are receiving a legitimate retirement pension from your country.
For example, if you are Canadian and you saved a bunch of money in an RRSP retirement account that allows you to withdraw funds at will, you’re not a retiree as far as Italy is concerned.
If you’re drawing CPP, or an employer pension that pays on a schedule somebody else controls, you qualify. The test is not public vs private; it comes down to whether you or somebody else controls when the money is withdrawn.
Qualifying for the 7% tax regime also doesn’t automatically give you Italian citizenship or even a permesso di soggiorno (a permit to stay in Italy). The visa is a separate application with its own process.
Thankfully, if you’re planning to retire in Italy off your pension, the elective residency visa requirements are not too onerous. Still, plan for 31-35K euro worth of yearly income to meet the financial expectations imposed somewhat arbitrarily by your local consulate.
What the 7% tax regime covers
If you qualify, Italy will tax your pension and other categories of foreign income at 7% for the first 10 years of your residence in Italy.
So the 7% tax regime covers:
Your foreign pension
Withdrawals from your foreign retirement accounts (from Italy)
Your foreign rental income
Your foreign dividends, interest and capital gains
Again, the foreign pension is the must-have to qualify. Once you have that, everything else is cargo.
You’re also exempt from IVIE and IVAFE, which are Italy’s wealth taxes on foreign properties and financial assets, and won’t have to file a quadro RW to declare said foreign assets.
After 10 years, these revert to ordinary Italian taxation. Think something like 32% on a 60,000 euro pension and 36% on an 80,000 one, less on smaller pensions.
Ten years at 7% is still strikingly generous.
What does it not cover? Anything produced in Italy. If you buy investment properties in Italy and rent them out, that’s allowed, but the rent is Italian-source and taxed at ordinary Italian rates, either 21% under cedolare secca or your full IRPEF bracket. Much higher than 7% either way.
Where the 7% tax regime applies
The following towns are eligible for the program:
Towns with no more than 30,000 people in the following 8 regions: Abruzzo, Molise, Puglia, Basilicata, Campania, Calabria, Sicilia, and Sardegna.
Towns with no more than 30,000 people affected by the 2009 L’Aquila earthquake, defined by Commissario delegato decree n. 3 of 16 April 2009 (49 comuni) and extended by decree n. 11 of 17 July 2009 (8 more). Since these are all in Abruzzo, I won’t include the list, since it’s redundant and already covered by the previous point.
Towns with no more than 30,000 people listed in annexes 1, 2 and 2-bis, which were affected by the 2016 earthquakes that devastated central Italy. The regions with comuni on these lists are Lazio, Umbria, Marche, and Abruzzo. Again, this doesn’t help anything in Abruzzo since the whole region is already eligible for the program (provided the town is at or below 30,000 residents).
So the non-south additions provided by the annexes are the following:
Lazio (14 eligible)
Accumoli (Rieti, 493), Amatrice (Rieti, 2,146), Antrodoco (Rieti, 2,238), Borbona (Rieti, 573), Borgo Velino (Rieti, 901), Cantalice (Rieti, 2,386), Castel Sant’Angelo (Rieti, 1,156), Cittaducale (Rieti, 6,400), Cittareale (Rieti, 374), Leonessa (Rieti, 2,019), Micigliano (Rieti, 119), Poggio Bustone (Rieti, 1,957), Posta (Rieti, 518), Rivodutri (Rieti, 1,121).
Too big: Rieti (44,866).
Umbria (14 eligible)
Arrone (Terni, 2,504), Cascia (Perugia, 2,930), Cerreto di Spoleto (Perugia, 961), Ferentillo (Terni, 1,767), Montefranco (Terni, 1,243), Monteleone di Spoleto (Perugia, 535), Norcia (Perugia, 4,399), Poggiodomo (Perugia, 81), Polino (Terni, 233), Preci (Perugia, 678), Sant’Anatolia di Narco (Perugia, 490), Scheggino (Perugia, 422), Sellano (Perugia, 918), Vallo di Nera (Perugia, 317).
Too big: Spoleto (Perugia, 35,875).
Marche (83 eligible)
