Italy 7% Flat Tax for Pensioners (2023)

FAQs

What is the 7 percent flat tax for retirees in 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.

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.

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.

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.

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.

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.

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.

Can you live in Italy on Social Security? ›

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.

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.

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.

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.

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.

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)

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.

Where do most retirees live in Italy? ›

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.

1. Wilmington, North Carolina. Living on a coast boosts happiness, health and well-being, according to a 2020 report.

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.

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.

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.

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.

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).

How long can you live outside the US without losing Social Security? ›

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.

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.

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.

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.

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.

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%).

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%.

What happens to my Social Security if I move to Italy? ›

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.