Many individuals move to Portugal and Spain to take advantage of their lower income tax rates. However, did you know that Italy also offers an appealing flat tax rate of 7% for retirees who decide to make it their home.
How does the 7% flat tax in Italy work?
If you receive a pension from another country and plan to relocate to a small Italian town with fewer than 20,000 residents on the eligibility list, you can opt for a flat tax rate of 7%. This means your foreign income including your pension will be taxed at this rate for nine years, starting from the year you make the choice, as long as you remain a resident of Italy and live in an approved town. Keep in mind that this is a flat tax, so no deductions are permitted.
You won’t have to worry about tax monitoring for your foreign assets. This means you can keep your overseas real estate and financial holdings private, without the need to report them or pay foreign estate taxes.
Important: this is merely a flat tax rate; it does not grant you a visa to relocate to Italy if you reside outside the EU. If you already live in the EU, the process is relatively straightforward. However, we have found that many lawyers and accountants in Italy are not aware of this tax incentive, making it essential to consult someone knowledgeable who can assist you.
What are the requirements to apply for the 7% tax program?
- You have not been a tax resident in Italy for at least five tax years before opting for the 7% flat tax regime.
- You must receive a foreign sourced pension. You can qualify even if your income comes from payments like a 401K or IRA, not just traditional pensions.
- You need to be a resident of a country that has a tax agreement with Italy, such as those in the EU, Canada, Japan, Russia, Switzerland, the UK, or the USA.
- Move to an eligible Italian town that qualifies for this specific tax incentive.
What regions in Italy are eligible for the 7% flat tax rate?
The 7% flat tax is specifically for towns in these regions that have fewer than 20,000 residents.
- Sicily
- Calabria
- Sardinia
- Campania
- Basilicata
- Abruzzo
- Molise
- Puglia
It also applies to specific towns in the followings regions previously affected by earthquakes.
- Lazio
- Marche
- Umbria
Before you jump into real estate, double-check that the town is on the approved list! If you have any questions, feel free to leave a comment, and we’ll get back to you. As for the best place to live in Italy, it’s definitely Marche in Central Italy! You get the stunning mountains and the beautiful Adriatic Sea right at your doorstep! Plus, there are plenty of charming hilltop towns in Marche that are included on the list.
