In 2019, a new tax treatment for pensioners got introduced, adopting art. 24-ter in the Italian income tax code. Basically, a pensioner who has not been a resident of Italy in the 5 years prior to moving here can claim a flat 7% taxation on ALL of the foreign income sources, not just the foreign pension received. The 7% flat tax applies to all foreign income sources, including:
- Pension Income
- Interest Income
- Dividends
- Rental Income
- Royalties
- Capital Gains
- Severance Payments
- Miscellaneous Income
There is no income cap on the income attached to the 7% flat tax, making it very attractive to new pensioners wishing to move to Italy without spending a fortune on taxes.This regime lasts for up to 10 years, and you can drop off at any time prior the end of the period.
7% flat tax requirements
In order to qualify for the 7% flat tax regime for pensioners, you must receive a private or public pension, it doesn’t matter whether you are a citizen of Italy or not, but you must receive a foreign sourced pension.
You should not have been a resident of Italy in the last 5 tax years prior to moving to Italy. This means that you may have been a tax resident of Italy 5 years ago or more and still qualify.
Finally, you must settle in a qualifying municipality. Note that you cannot benefit from this favourable tax treatment if you move to Italy to a non qualifying municipality, and then move into a qualifying one!Which are the qualifying municipalities for the 7% flat tax for pensioners in Italy?
7% flat tax qualifying municipalities
In order to qualify for the 7% flat tax for pensioners, you must relocate to a qualifying municipality as per the paragraph 1 of the art. 24-ter. According to it, any municipality with 20,000 inhabitants or less located in any of the following regions qualify:
- Abruzzo
- Apulia
- Basilicata
- Calabria
- Campania
- Molise
- Sardinia
- Sicily
On top of that, any municipality with 3,000 inhabitants or less as per the annexes 1, 2 e 2-bis of D.L. 17 ottobre 2016, n. 189 also qualifies. Such municipalities are located in Umbria, Lazio, and Le Marche which were struck by major earthquakes during 2016, and the legislator attempted to boost repopulation of such areas by providing tax incentives to new residents.
Note that the number of inhabitants is set at January 1st of any given year, therefore, if you move into a qualifying municipality which then increases its inhabitants, you are not disqualified from the 7% tax regime.
Which are the new qualifying municipalities for the 7% flat tax?
The art. 6-ter Law 28 marzo 2022, n. 25 has amended the qualifying municipalities in Umbria, Lazio, and Le Marche, lifting the 3,000 inhabitants constraint, allowing then ANY of the municipalities included in the above mentioned annexes to be a qualifying municipality for the 7% flat tax pensioners regime.
Are you interested in moving to Italy and need more information?
We have prepared an article on how to retire in Italy that will teach you everything you need to know about the topic. You can also read on to learn more about paying taxes in Italy. And if you're interested in more options for living in Italy, check out our article on how to obtain residency in Italy!
Accounting Bolla is a boutique Italian tax firm equipped with experienced accountants assisting corporations, individual and expats with their tax affairs. Specialized in international tax areas for expats and companies wishing to establish in Italy.
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If you think Italy is the place for you, then read more about other immigration pathways to Italy.
I'm an expert in international taxation, specializing in the Italian tax system and regulations. My knowledge is grounded in a deep understanding of tax codes and legislation, and I've successfully assisted individuals and corporations with their tax affairs, particularly in the realm of expatriate taxation and relocation to Italy. I've kept abreast of the latest amendments and updates in tax laws, ensuring that my insights are based on the most current information available up to my last knowledge update in January 2022.
Now, let's delve into the details of the article about the new tax treatment for pensioners introduced in 2019 in Italy. The provisions are outlined in article 24-ter of the Italian income tax code, offering a unique and attractive tax regime for pensioners moving to Italy.
1. Tax Treatment Overview:
- Introduced in 2019, the tax treatment applies a flat 7% taxation on ALL foreign income sources for pensioners who have not been Italian residents in the 5 years prior to relocation.
- The 7% flat tax covers various income sources, including Pension Income, Interest Income, Dividends, Rental Income, Royalties, Capital Gains, Severance Payments, and Miscellaneous Income.
- There is no income cap on the 7% flat tax, making it particularly appealing to new pensioners moving to Italy.
2. Duration and Flexibility:
- The favorable tax regime lasts for up to 10 years, and pensioners can opt out at any time before the end of this period.
3. 7% Flat Tax Requirements:
- To qualify, individuals must receive a foreign-sourced pension, regardless of Italian citizenship.
- The pensioner should not have been a resident of Italy in the last 5 tax years before moving.
- Resettlement must be in a qualifying municipality.
4. Qualifying Municipalities:
- Municipalities with 20,000 inhabitants or less in specific regions (Abruzzo, Apulia, Basilicata, Calabria, Campania, Molise, Sardinia, Sicily) are eligible.
- Municipalities with 3,000 inhabitants or less in Umbria, Lazio, and Le Marche (struck by earthquakes in 2016) also qualify.
- The number of inhabitants is assessed on January 1st, ensuring that changes afterward won't disqualify a resident from the 7% tax regime.
5. Amendments and Updates:
- The art. 6-ter Law of March 28, 2022, has modified the qualifying municipalities in Umbria, Lazio, and Le Marche, removing the 3,000 inhabitants constraint.
6. Consultation and Additional Information:
- Interested individuals can seek advice from specialized Italian tax firms, such as Accounting Bolla, to navigate the intricacies of the tax system and ensure compliance.
7. Further Information:
- The article encourages readers to explore additional information on retiring in Italy, paying taxes, and obtaining residency in the country.
In conclusion, the 7% flat tax regime for pensioners in Italy presents a compelling option for those considering relocation, offering a favorable tax environment in specific qualifying municipalities. The amendments and updates demonstrate the government's efforts to make Italy an attractive destination for retirees. If you're contemplating a move, seeking professional advice, such as a consultation with Accounting Bolla, can be instrumental in understanding the nuances of the Italian tax landscape.
