Italy 7% Flat Tax For Pensioners - Tax Authorities - Italy (2024)

In Italy, it is possible to take advantage of a 7% flattax if you move to a small location in southernItaly.

In fact, as of 2019, there are incentives for those who receivea pension provided by foreign entities and chooseto move to certain regions in the south, mainly tomunicipalities with less than 20,000 inhabitantsor to those, with a maximum of 3,000 inhabitants,affected by the earthquakes that took place on 24^th ofAugust, 26^th and 30^th of October in 2016 and18^th January 2017.

A flat tax of 7% percent is thus applicable,i.e., particularly advantageous taxation for about ten yearsprovided that the expiration of the period is not extended.

Who Is Eligible for the 7% Flat Tax?

In order to be among the lucky ones who can enjoy promising taxbreaks, certain requirements must be met: first, the 7%flat tax applies to nonresident, foreignpensioners, regardless of whether they are foreigners orItalians residing abroad.

In addition, it is required:

• non-tax residence in Italy in the five taxperiods preceding the one in which the new tax benefits would beactivated;
• having had, until the time of the change, previousresidence in countries with which administrativecooperation agreements with Italy are in force;
• be individuals;
• be holders of pensionsabroad, not having had tax residence in Italy in the fivetax periods preceding the one in which the request is made.

Regions Affected by the 7% Flat Tax

Anyone who moves to a municipality in southernItaly whose population does not exceed20,000 will be eligible for the flat tax, mainly fromamong those in Sicily, Calabria, Sardinia,Campania, Basilicata, Abruzzo, Molise and Apulia, oranyone who moves to a municipality whose population doesnot exceed 3,000 in a territory in southernItaly hit by earthquakes between 2016 and 2017, mainlyfrom among those in Marche,Umbria, Abruzzo andLazio

In addition to the fantastic climate, the dreamy landscape, thewarmth of its people, and the delicious cuisine,"details" that make Southern Italy the ideal place tospend the years of well-deserved rest, also making the idea ofrelocation attractive could be an advantageous tax incentive.

Moreover, the regions concerned offer all kinds of opportunitiesto find the ideal small town to elect as residence, one can in factchoose from places of historical interest, seaside resorts,mountain villages, hills, plains ...etc.

What Did the Law Provide?

The Budget Law 2019, (Law No. 145/2018) dedicated a specialchapter (Art. 1, paras. 273 – 275) to those who benefit froma pension treatment abroad (pensions or comparable allowances).These people, if they wish, will be able to access a preferentialregime that allows them to subject their income to a 7% substitutetax.

A flat tax therefore, equal for all, regardless of the economicconditions of the applicant.

The Tuir, Testo Unico delle Imposte suiRedditi, has been enriched with Article24-ter, which, in addition to tax incentives, guaranteesthose who make a choice in favor of any small location in southernItaly, a series of reliefs and concessions.

One is relieved of tax monitoring reporting requirements and isexempted from paying Ivie, the tax on realestate investments abroad, and Ivafe,the tax on the value of assets abroad, whichnormally burden Italian residents (individuals) holding currentaccounts, financial products, and savings accounts abroad.

The jurisdiction where the last tax residence was located mustbe indicated so that the Internal Revenue Service can forward therequest to the tax authorities of the jurisdiction in question.

How Long Can You Take Advantage of The Flat Tax?

Currently, there are ten tax periods affectedby the measure, during which the retiree will also be exempt fromsubmitting the RW panel of the Unico form, in which foreignfinancial assets and investments held by individuals residing inItaly are declared to the Italian tax authorities.

In addition, the payment of the tax on the value of real estatelocated abroad (Ivie) and the tax on the value of financialproducts, current accounts and savings accounts held abroad (Ivafe)will also be waived for 10 years.

The substitute tax must be paid in a lump sum by the deadlinefor paying the balance of income tax.

The option must be expressed in the tax return for the taxperiod in which residence in Italy is transferred and is renewable,for five years, from that period. It can also be revoked withoutprejudice to the effects already obtained in previous taxperiods.

A retiree who wants to move to one of themunicipalities affected by the measure but who is not affected bythe relief can safely renounce it by indicating it at the time oftransfer of residence.

The content of this article is intended to provide a generalguide to the subject matter. Specialist advice should be soughtabout your specific circ*mstances.

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