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
- Rental Income
- 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:
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.
Reach out to Nicolò and request a consultation for Italian tax and general relocation to Italy advice
If you think Italy is the place for you, then read more about other immigration pathways to Italy.
Under the new preferential tax regime, an individual would be exempt from income taxes at the normal scale on all foreign income and only pay 7%. This includes pension income, capital gains and dividends, overseas business income, rental income and Social Security.How much is Italian tax for retirees? ›
There is no minimum income requirement, although it is necessary to demonstrate that you can support yourself financially and not burden the State. If you decide to retire in Italy, income tax is charged at 7% per annum for up to 10 years.Is US Social Security income taxed in Italy? ›
In case you are an Italian citizen or you are applying for Italian citizenship, then you will be liable to pay Italian taxes on your public US pension. In this case your American pension will be counted as a foreign income, therefore you must declare it in your income tax return and pay tax on it.Can an American retire in Italy? ›
In order to retire to Italy, a foreign citizen must comply with a few requirements. Among these, the foreign citizen must be retired and have a minimum annual income of EUR 31,000. For married couples seeking to retire in Italy, the minimum amount necessary is EUR 38,000.What is the average retirement income in Italy? ›
Annual average gross pension income in Italy from 2015 to 2019 (in euros)
|Characteristic||Average gross pension value in euros|
Brackets are adjusted each year for inflation. There are seven tax brackets for most ordinary income for the 2023 tax year: 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent and 37 percent.Is it cheaper to retire in Italy than in the US? ›
Housing Costs in Italy
Italy is far less expensive than the U.S. when it comes to housing. According to August 2022 data from Numbeo.com, average rents in Italy are almost 59% lower than they are in the U.S. For a one-bedroom city center apartment, you can expect to pay about $690 per month in rent.
- Panama. Panama tops most lists of the best countries to retire in, and there are good reasons for that. ...
- Costa Rica. ...
- Portugal. ...
- Ecuador. ...
- Greece. ...
- Belize. ...
- Nicaragua. ...
- The Philippines.
Residents and non-residents
All American citizens who are Italian residents should file a tax return in Italy and must pay taxes on their global income. Those who are not residents of Italy will only pay taxes on the income that is earned in Italy.
If you are a U.S. citizen and qualify for Social Security retirement, family, survivor or disability benefits, you can receive your payments while living in most other countries.
Italy is happy to welcome retiring expats and their spending money. But to legally live in Italy as a retiree, you'll need to be able to show that you still have an income. Retirement income can come from many sources including: Social security checks.What taxes do expats pay in Italy? ›
American expats in Italy are also subject to regional income taxation. Regional income tax rates range from 1.23% to 3.33%, depending on the applicable region of residence.Where do most American expats live in Italy? ›
With close to 3 million inhabitants, Rome is the third largest city of Europe. It's also home to 300.000 fellow expats, as around 10% of the city's population is non-italian.Where is the most affordable place to live in Italy? ›
- Turin, Palermo, and Naples are the cheapest cities to live in in Italy.
- The cost of living in Milan is just slightly higher than the living costs in Rome.
- The cost of living in Florence is only slightly lower than the cost of living in Rome.
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.
There are more than 15,000 Americans living in Italy. Most of them have chosen as the place of residence popular, large Italian cities, such as Milan or Rome, but they can also be found in other Italian regions.What is the maximum pension in Italy? ›
The allowance is equivalent to 80% of the last salary, but there are ceilings. In 2020 the maximum benefit was EUR 998.18 per month for workers with a working salary up to EUR 2 159.48 per month. For higher earnings the allowance equals EUR 1 199.72 per month.What is the standard deduction for seniors over 65 in 2022? ›
For 2022, the additional standard deduction amounts for taxpayers who are 65 and older or blind are: Single or Head of Household – $1,750 (increase of $50) Married taxpayers or Qualifying Widow(er) – $1,400 (increase of $50)What is the standard deduction for seniors over 65 in 2023? ›
2023 Standard Deduction
Taxpayers who are at least 65 years old or blind can claim an additional standard deduction of $1,500 is allowed for 2023 ($1,850 if you're claiming the single or head of household filing status).
Every taxpayer is entitled to claim a standard deduction or to itemize their deductions. These deductions effectively constitute a 0% tax rate in the sense that there's no tax imposed on income represented by these deductions.
It is an ideal place to move to for Americans looking for a permanent, or even part-time retirement. The country's most attractive features include healthy fresh food, a simple, easy-going lifestyle, and a world renowned healthcare system open to most expats after six months.Which European country is best for American retirees? ›
- Portugal. Portugal has been deemed a secret hot spot for a European retirement. ...
- France. The close second to Portugal for retirees came to France. ...
- Slovenia. Making its way close to the top of the list for countries in Europe to retire went to Slovenia. ...
- Italy. ...
1. Wilmington, North Carolina. Living on a coast boosts happiness, health and well-being, according to a 2020 report.What is the easiest country for Americans to retire to? ›
- #5 Portugal.
- #3 Malta.
- #2 Costa Rica.
- #1 Mexico.
The bonus bollette or bonus sociale, designed to offset ever-rising gas and electricity bills for lower-income households, will be available to those with an ISEE of up to 15,000 euros in 2023, the threshold having been raised from 12,000 in 2022.Can a US citizen buy a house in Italy? ›
There is no limit on US citizens buying or selling properties in Italy thanks to something called mutual agreements. These apply between Italy and foreign citizens meaning that you don't need any special documents or pay higher taxation on property when compared to citizens from within the EU.Does Italy tax dual citizens? ›
Do Dual Citizens Have to Pay Taxes in Italy? The short answer is that you have to pay taxes in Italy only if you are actually living there over 183 days of the year. There is a distinction between being an Italian citizen and an Italian resident, and it makes all the difference when it comes to tax liability.What happens to my Social Security if I leave the US? ›
If you are a U.S. citizen, you may receive your Social Security payments outside the U.S. as long as you are eligible for them. However, there are certain countries to which we are not allowed to send payments.How long can a US citizen live in Italy? ›
All non-residents are required to complete a declaration of presence (dichiarazione di presenza). Prospective residents or anyone intending to stay in Italy for longer than 90 days must obtain a permit of stay (permesso di soggiorno).
If you leave the U.S., we will stop your benefits the month after the sixth calendar month in a row that you are outside the country. You can make visits to the United States for specific periods of time, depending on how long you've been outside, to continue receiving your benefits.How much income required for retirement visa in Italy? ›
Elective Residence Visa
The foreign citizen must be retired with a minimum annual income of €31,000. For married couples, this annual income amount increases to €38,000. If children will accompany the retiree/s, a minimum of €20,000 annually is required for each dependent child.
The residency permit allows you to stay in Italy for a period of time which ranges from 2 to 5 years, and which generally allows you to travel to other Schengen countries for up to 3 months every 6 months.Where is the safest place to live in Italy? ›
These 4 areas ranked high on the Quality of Life survey:
- Abruzzo. The region of Abruzzo lies to the east of Rome. ...
- Apulia. ...
- Milan. ...
How does the flat tax regime work? New residents opting for this flat-tax regime will pay, instead of ordinary tax rates, a flat-rate tax of € 100,000 per year on all their non-Italian sourced income; this option lasts up to 15 years.What are the benefits of retiring in Italy? ›
Italy is often chosen as one of the best countries where expats decide to retire because of its Mediterranea weather, food and wine culture. In addition to this, Italy is known for its relaxed lifestyle, quality of life and for being cheaper than most other European countries.How much is property tax in Italy for foreigners? ›
Property tax ranges from 0.4% to 0.7% of fiscal value, depending on location and property type. There is no wealth tax in Italy.Do retired expats pay taxes in Italy? ›
2019's 7% Tax regime for pensioners
To attract more pensioners, Italy introduced in 2019 a new tax regime. It consists of a 7% flat tax rate on all foreign sourced income. In addition to that, you do not have to disclose your foreign held assets and you do not pay any wealth tax.
The 7% flat tax applies to all non-Italian sourced income (i.e. not only non-Italian pensions but potentially all types of non-Italian sourced income) while all income realized in Italy are subject to ordinary individual taxation rules (including the application progressive rates up to 43%).How much is social security tax in Italy? ›
The total social security rate is around 40% of the employee's gross compensation (the rate depends on the work-activity performed by the company, the number of employees of the company, the employee's position), and is shared as follows: Employer's charge is around 30%. Employee's charge is around 10%.
How Benefits Can Be Paid. If you have Social Security credits in both the United States and Italy, you may be eligible for benefits from one or both countries. If you meet all the basic requirements under one country's system, you will get a regular benefit from that country.