Italy 7% Flat Tax for Foreign Retirees (2026): The 30,000 Inhabitant Cap Expansion Explained
MG Law Firm — Updated June 2026
Key Takeaway
As of April 7, 2026, Italy’s 7% flat tax regime for foreign retirees (Art. 24-ter TUIR) now covers municipalities with up to 30,000 inhabitants — up from 20,000. The change, introduced by Law 34/2026, adds 74 new eligible towns across Southern Italy. Foreign retirees who qualify pay a flat 7% substitute tax on all foreign-source income for up to nine years. A tax assessment is required before relocating.
Italy’s 7% flat tax regime for foreign retirees has been one of the most discussed tax incentives in Europe since its introduction in 2019. Simple in concept — move to a qualifying Southern Italian municipality, pay 7% on all foreign income — it attracted thousands of retirees from the United States, United Kingdom, Germany, Switzerland, and beyond.
In April 2026, the regime became significantly more flexible. The population ceiling for eligible towns rose from 20,000 to 30,000 inhabitants, opening access to larger, better-connected communities across the South. This guide explains what changed, which municipalities now qualify, and what foreign retirees need to assess before making the move.
What Is Italy’s 7% Flat Tax Regime for Foreign Retirees?
Governed by Article 24-ter of the Italian Tax Consolidation Act (TUIR, as amended), the regime allows eligible foreign retirees who transfer their Italian tax residency to a qualifying municipality to pay a single substitute flat tax of 7% on all foreign-source income — in place of Italy’s standard progressive IRPEF rates (which reach up to 43%), plus regional and municipal surcharges.
The 7% rate applies not only to pension income but to all income produced outside Italy — including foreign dividends, rental income from properties abroad, capital gains on foreign assets, and other foreign-source receipts.
Income generated in Italy — from Italian real estate, Italian employment, or Italian business activity — is excluded from the regime and taxed under standard IRPEF rules.
What Changed in April 2026? The Expansion to 30,000-Inhabitant Towns
Article 26 of Law 34/2026 (the SME Law, Legge Annuale per le PMI) amended Article 24-ter TUIR, replacing the reference to municipalities “not exceeding 20,000 inhabitants” with “not exceeding 30,000 inhabitants.” The change became effective on April 7, 2026.
The practical result: 74 new municipalities entered the eligible perimeter, adding access to larger and better-serviced towns — many of which have airports, university hospitals, and international transport links that the smaller sub-20,000 towns lacked.
New Towns Added by Region (April 2026)
| Region | New Municipalities Added |
|---|---|
| Campania | 23 |
| Sicily | 18 |
| Puglia | 18 |
| Sardinia | 7 |
| Abruzzo | 5 |
Eligible Regions for the 7% Flat Tax
The regime applies exclusively to municipalities located in the following eight Southern Italian regions:
- ►Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise, Puglia
A separate eligible category also covers specific earthquake-reconstruction municipalities in central Italy — in Lazio, Marche, Umbria, and parts of Abruzzo — regardless of population size. This category is often overlooked and may suit retirees who prefer central Italy over the South.
Who Qualifies for Italy’s 7% Flat Tax Regime?
There is no nationality or citizenship requirement. The conditions are:
- ►Foreign pension income: the applicant must receive a pension from a foreign state, private fund, or employer, paid from outside Italy
- ►Non-Italian tax residency: must not have been an Italian tax resident in any of the five tax periods preceding the year of application
- ►Relocation to an eligible municipality: establish tax residency in a qualifying Southern Italian town with a population not exceeding 30,000
- ►Option filed with the Agenzia delle Entrate: the election must be included in the first Italian tax return (Modello Redditi PF) filed after relocation
Legal note: Eligibility depends on the specific facts of each case — including the nature of the foreign pension, the applicant’s prior residency history, and the status of the chosen municipality. This content is for informational purposes and does not constitute tax advice. A qualified tax assessment is required before making the election.
What Income Does the 7% Flat Tax Cover?
Despite being labelled a “pension tax regime,” the 7% flat tax applies to all foreign-source income once the option is validly elected:
- ►Foreign pension and social security income
- ►Dividends from foreign companies
- ►Rental income from properties located abroad
- ►Capital gains on foreign assets
- ►Other income of foreign origin (interest, royalties, etc.)
Income produced in Italy — such as income from Italian rental property, Italian-source dividends, or any professional activity carried out in Italy — falls outside the 7% regime and is subject to the standard IRPEF progressive rates. This distinction requires careful planning, particularly for retirees who own Italian property or maintain part-time professional activity.
How Long Does the Regime Last — and What Is the Annual Cost?
The 7% flat tax option is valid for nine consecutive tax periods starting from the year the option is exercised. It cannot be renewed after the nine-year period expires.
If you revoke the option early — for example by changing your residency to a non-eligible municipality or by ceasing to be an Italian tax resident — the regime ends and Italian standard taxation applies from that point forward.
Annual municipal contribution: since the 2023 Budget Law, beneficiaries are required to pay €2,000 per year to the municipality of residence, in addition to the 7% substitute tax. This payment is made separately and does not reduce the tax owed.
The 7% rate substitutes IRPEF, regional income surcharge, and municipal income surcharge. Italian social security contributions, VAT (if applicable), and Italian property taxes (IMU, TARI) remain separately applicable.
Key Considerations Before Relocating Under the 7% Regime
- ►Verify the municipality’s eligibility before committing. The eligible municipality list is defined by the legislation and population data — a town’s status can change as census figures are updated. Confirm eligibility with a qualified tax advisor before signing any lease or purchase agreement.
- ►Tax residency ≠ physical presence. Establishing Italian tax residency requires formal registration with the Anagrafe (municipal registry) and AIRE cancellation (for Italians abroad). Simply renting in Italy does not automatically transfer tax residency — and the election is only valid once residency is correctly established.
- ►Double taxation treaty interaction. The 7% flat tax does not automatically override your home country’s right to tax your pension income. Depending on the applicable treaty, Italy may or may not have exclusive taxing rights over your foreign pension. A bilateral tax analysis is essential — particularly for US, UK, Swiss, and German nationals.
- ►The nine-year window is finite — plan for what comes after. Many retirees focus on the 7% rate but underestimate the tax burden after the regime expires. Standard IRPEF rates applying to foreign income in year ten may substantially change the cost-benefit calculation.
- ►Immigration status. Non-EU nationals must hold a valid Italian visa or residence permit. The tax regime does not grant a right to reside in Italy — immigration requirements apply in parallel and must be resolved separately.
Related: Italian Tax Residency for Foreign Individuals — a guide to the rules, procedures, and key risks when transferring your fiscal domicile to Italy.
Italian Tax Residency — Retirees
Is the 7% Flat Tax the Right Move for Your Situation?
The eligible town list has expanded — but eligibility, treaty interaction, and the nine-year window all require careful case-by-case analysis. MG Law Firm assists foreign retirees with tax residency assessment, relocation planning, and bilateral tax analysis. Fully managed in English, remotely.
Schedule a Tax AssessmentFrequently Asked Questions
What is Italy’s 7% flat tax for foreign retirees?
Italy’s 7% flat tax (Article 24-ter TUIR) allows eligible foreign retirees who transfer tax residency to a qualifying municipality to pay a 7% substitute tax on all foreign-source income, in place of standard IRPEF progressive rates. The regime applies for nine consecutive tax years and covers all income produced outside Italy, not only pension income.
What changed in 2026 for Italy’s 7% flat tax for retirees?
Article 26 of Law 34/2026 (effective April 7, 2026) raised the population threshold for eligible municipalities from 20,000 to 30,000 inhabitants. This added 74 new towns across Southern Italy, with the largest gains in Campania (23), Sicily (18), and Puglia (18).
Which regions in Italy are eligible for the 7% flat tax?
Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise, and Puglia. Specific earthquake-reconstruction municipalities in Lazio, Marche, Umbria, and parts of Abruzzo are also eligible regardless of population size.
Who qualifies for Italy’s 7% flat tax regime?
You must: (1) receive foreign pension income; (2) not have been an Italian tax resident in the five preceding tax periods; (3) establish tax residency in an eligible municipality; and (4) file the option in your first Italian tax return. There is no nationality requirement.
Does the 7% flat tax apply only to pension income?
No. Although applicants must hold foreign pension income to qualify, the 7% regime covers all foreign-source income — including dividends, foreign rental income, capital gains on foreign assets, and other foreign receipts. Income produced in Italy is excluded and taxed under standard IRPEF rates.
How long does the 7% flat tax regime last in Italy?
Nine consecutive tax periods from the year the option is exercised. The regime cannot be renewed. If revoked early or residency conditions are no longer met, standard Italian taxation applies immediately.
Is there an annual payment required under the 7% flat tax regime?
Yes. Since the 2023 Budget Law, beneficiaries must pay €2,000 per year to the municipality of residence, separate from the 7% substitute tax.
This article is for informational purposes only and does not constitute legal or tax advice. Rules may vary depending on the client’s individual circumstances, residency history, and applicable double taxation treaties. A qualified tax assessment is recommended before making any election. Last updated: June 2026.
