Picture a hill town in Puglia or Sicily at nine in the morning: the bar is full, the church bells are late, and the municipality has just discovered it is competing for retirees. Since 2019, Italy has had an option that gives foreign pensioners who settle in small southern towns a single tax rate of 7%. The flat tax for retirees in Italy is one of Europe's more attractive incentives, but it is narrow. Here are the rules as the Agenzia delle Entrate gives them.
What does the flat tax for retirees in Italy cover?
The option applies to people who receive pensions paid by foreign bodies and transfer their tax residence to Italy. In exchange, you pay a 7% substitute tax on all income produced abroad, of any category, not only the pension. Foreign rents, dividends and interest are included. The 7% replaces IRPEF, the regular personal income tax, on that income.
Three limits matter. Income that arises in Italy, such as an Italian pension or a rent from an Italian property, stays under the ordinary IRPEF. If you choose the option you give up deducting foreign taxes against it. And the 7% replaces Italian IRPEF only: it does not remove tax that your home country may still be allowed to charge on your pension under its treaty with Italy (see the traps below). In exchange, while the option runs you are relieved of the foreign-asset reporting and wealth taxes described in taxes in Italy for new residents (IVAFE, IVIE and the quadro RW), for the countries covered by the option.
Where can you live to get the flat tax for retirees in Italy?
The town is what makes or breaks eligibility. The Agenzia says you must live in a municipality of no more than 30,000 inhabitants in one of eight regions: Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise and Puglia. The limit has been 30,000 since 7 April 2026; before that it was 20,000. Municipalities of up to 30,000 inhabitants hit by the 2009 L'Aquila or 2016 central Italy earthquakes (listed in the annexes to the 2016 earthquake decree-law) also qualify.
The population counted is the ISTAT figure at 1 January of the year before the first year of the option. A town close to the threshold deserves a careful check. If you later move to another eligible municipality from the second tax period, the option stays valid. For an overview of what living in the South costs, see cost of living in Italy.
What other conditions apply?
- The pension must be paid by a foreign body.
- You must not have been an Italian tax resident in the five tax periods before the first year of the option (the statute's rule; the Agenzia's summary page does not repeat it).
- Your last country of residence must have an administrative cooperation agreement on tax with Italy. In practice, according to the Agenzia's circular 21/E of 2020, this covers European countries and those with a tax treaty or an information-exchange agreement, including Switzerland and the United Kingdom.
The numbers invite a quick conclusion, but the conditions are technical: last country of residence, years of non-residence, which of your pensions your home country can still tax (public, social-security or private), the exact status of your target town. If you want a check list of what to confirm before you choose a municipality, Moovy, Hello Expat's AI assistant, can build one for your case. The final word belongs to a tax adviser, and for a French pension to an Italian commercialista and a French adviser together.
How long does it last and how do you claim it?
The Agenzia's page speaks of nine tax periods. Its 2020 circular explains that the law counts the nine periods following the one in which the option takes effect, so the total is up to ten tax years. You exercise the option in your tax return for the year of your transfer, then pay the tax in one payment by the balance date, with an F24 form (tax code 1899). If you do not pay in full and on time, the option lapses, unless you pay before the balance date of the following year; interest and penalties remain due (circular 21/E of 2020).
A remark for the long term: from 1 January 2027, the 1986 income tax code is replaced by a new text (legislative decree 117 of 19 June 2026), in which the retirees' regime moves to article 247. The text published on 3 July 2026 still mentions 20,000 inhabitants in that article, while 30,000 has applied since April 2026: if you plan to move from 2027, have the threshold confirmed. The old reference to "article 24-ter" will disappear.
What traps catch retirees?
- A town slightly too big. Use the official ISTAT figure, not an estimate.
- Assuming 7% covers everything. Italian pensions and rents are taxed normally.
- Pensions your home country can still tax. Public-sector pensions are the usual case: tax treaties often let the paying country tax them, and tax paid there cannot be deducted from the 7%. You can exclude that country from the option, as explained in the Agenzia's circular. For French retirees the rule goes further, as the paragraphs after this list show.
- Forgetting the rest of the move. You still need residence, health cover and a bank account; see retire in Italy.
- Asking your home country to stop taxing you. A French retiree should not ask the pension fund or the tax office to stop the French tax because of the Italian option: France keeps its right under the treaty. Declare those pensions in Italy as well: according to the French government's reply of 27 January 2026, the Agenzia has been reassessing French retirees who did not since 2021.
- Counting on the regime without advice. It commits you for years. Compare it with ordinary taxation in your case before you buy or sign a lease.
French retirees: the case that surprises many. Under the France-Italy treaty of 5 October 1989, the basic pension and the compulsory supplementary pensions (the French basic schemes, Agirc-Arrco and the other compulsory schemes on the list exchanged in 2000) are taxable in both countries (article 18, paragraph 2). France therefore keeps taxing them after you move. Under ordinary Italian rules, Italy credits the French tax up to the amount of the Italian tax (article 24, paragraph 2). Under the 7% regime there is no such credit, so you would pay French tax plus 7%. You then have two choices: keep France inside the option and pay both, or exclude France from it (article 24-ter, paragraph 8 of the TUIR), in which case all your income from France falls under ordinary IRPEF with a credit for the French tax, and the 7% applies to your other foreign income. The exclusion cannot be withdrawn later, so have both options calculated by an Italian commercialista and a French tax adviser before you choose. Other pensions follow different treaty rules: French civil-service pensions are taxed in France only (article 19, paragraph 2, unless you are an Italian national without French nationality), and private non-compulsory pensions in Italy only (article 18, paragraph 1).
Compare with the other newcomer options in Italy's impatriati regime (for workers) and flat tax for new residents in Italy (for very high foreign incomes).
When does the flat tax for retirees in Italy pay off?
It depends on three things: how much of your income is foreign, which of your pensions your home country keeps the right to tax, and what ordinary IRPEF would cost you (23% to 43% in 2026, plus regional and municipal surcharges, after deductions and any treaty credit). The option forbids deducting foreign tax from the 7%. For a pension that your home country keeps the right to tax, you may pay there and also 7% in Italy, which is why the exclusion option exists. Before you choose a town, have both calculations made with your own figures by a tax adviser who knows the Italian system and your home country's.
How is the regime different from the other newcomer regimes?
Three Italian regimes target newcomers, and they do not suit the same person:
| Regime | Who it targets | What it does |
|---|---|---|
| Flat tax for retirees | Foreign pensioners in small southern towns | 7% on all foreign-source income |
| Impatriati | Skilled workers taking an Italian job | 50% of Italian work income taxed |
| New residents | People with very large foreign incomes | €300,000 a year on foreign income |
Read the other two if your situation does not match: Italy's impatriati regime and flat tax for new residents in Italy.
What is a sensible order of steps?
- Check the pension. Is it paid by a foreign body, and which of your pensions does your home country still have the right to tax under its treaty with Italy (public, social-security or private)?
- Check your recent history. No Italian tax residence in the five previous tax periods; last residence in a country with a tax cooperation agreement.
- Shortlist towns and verify the population. Use ISTAT's figure as of 1 January of the year before the first year of the option, and confirm the region is on the list.
- Take advice from an Italian accountant or tax lawyer, together with a tax adviser in your home country if it keeps a right to tax your pension, and ask whether a ruling request (interpello) is worth it in your case.
- Move and register. Residence at the Comune (residence in Italy), codice fiscale, health cover with an S1 (healthcare in Italy).
- Exercise the option and pay. In your tax return for the year of the move, with the F24 (code 1899) by the balance date.
The pensionati esteri regime, as Italian sources call it, rewards preparation. A mistake in step 3 or 6 can undo years of planning.
Who may not benefit from the 7%?
The regime is built for people whose income is largely foreign and largely private. If most of your pension is taxed in your home country under the treaty, if your foreign income is low enough that ordinary rates are already close to 7%, or if you want to live in a city, the option adds little or nothing. Compare it with ordinary taxation using your own numbers, and keep the written comparison in your file in case the Agenzia asks questions later.