What is the 7% flat tax for foreign pensioners in Italy?

Article 24-ter TUIR allows foreign pensioners relocating to qualifying Southern Italian municipalities to pay a substitute tax of 7% on all foreign-source income — replacing standard IRPEF rates. The benefit lasts for 9 fiscal years.

Which regions in Italy qualify for the pensioner 7% flat tax?

The regime applies to municipalities with a population under 20,000 inhabitants in the following regions: Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise, and Puglia. Some earthquake-affected zones in central Italy also qualify.

Can a foreign pensioner get an Italian mortgage?

Yes, though the profile is more complex than a salaried worker. Italian banks assess pension income differently — they look at the stability and source of the pension, the LTV, and the age of the applicant at mortgage maturity. Non-residents are capped at 60% LTV. Working with an advisor who knows which banks accept foreign pension income is important.

Retiring to Italy
The 7% Flat Tax for Foreign Pensioners

Foreign pensioners who relocate to qualifying Southern Italian municipalities can replace standard Italian income tax with a single 7% substitute tax on all foreign-source income — pensions, dividends, capital gains, everything — for 9 years.

☀️ Written by Christina Carey — Mortgage Advisor, Partner at Facile.it · Milan

The regime explained

7% on everything foreign — for 9 years

How it works

Article 24-ter of the Italian Income Tax Code (TUIR) allows qualifying foreign pensioners to opt for a 7% substitute tax on all foreign-source income. This replaces standard IRPEF rates, which can reach 43% at higher income levels.

The 7% applies to all foreign-source income — pension payments, dividends, capital gains, rental income from abroad, bank interest — consolidated into a single flat payment each year. The simplicity is one of the regime's strengths: one rate, one calculation, nine years.

Italian-source income (if any) remains subject to standard taxation. But for retirees living primarily on foreign pensions and investment income, the Italian tax liability under this regime is minimal.

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7% flat rate on all foreign-source income — replacing IRPEF rates of 23–43%

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9 fiscal years from the year of Italian residency registration

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All foreign income covered — pensions, dividends, capital gains, foreign rental income, interest

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Location-specific — only municipalities under 20,000 residents in qualifying Southern regions

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Optional — you opt in when filing your first Italian tax return; it is not automatic

Eligibility

Who qualifies and where?

Personal requirements

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You receive a pension from a foreign entity (state pension, private pension, occupational pension)

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You have not been an Italian tax resident in the previous 5 years

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You transfer your tax residency to a qualifying Italian municipality

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You opt in when filing your first Italian income tax return (modello 730 or Redditi PF)

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Not all pensioners benefit. The value depends heavily on your home country's rules and any applicable tax treaties. Some pensioners may be better served by a different structure. A tax advisor familiar with both countries is essential before relocating.

Qualifying regions

The property must be located in a municipality with a population under 20,000 in one of these regions:

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Sicily — Taormina, Cefalù, Agrigento area, rural towns

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Calabria — Tropea, Scilla, Pizzo Calabro

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Sardinia — Alghero area, Costa Verde, Ogliastra

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Puglia — Salento peninsula, Valle d'Itria, Gargano

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Campania, Basilicata, Abruzzo, Molise — qualifying smaller towns

Major cities like Palermo, Naples, or Catania do not qualify — the population threshold applies to the specific municipality of residence.

The mortgage question

Can foreign pensioners get an Italian mortgage?

Yes — with the right bank and profile

Italian banks can and do offer mortgages to foreign pensioners, but the assessment criteria differ from a salaried worker. Banks look at three main factors:

Pension stability: state pensions and occupational pensions from recognised institutions are treated favorably. Private pension drawdowns may require more documentation to establish the income stream's longevity.

Age at mortgage maturity: Italian banks apply internal age limits — typically the mortgage must be fully repaid by the borrower's 75th or 80th birthday. This means shorter loan terms for older applicants, which affects the monthly payment calculation.

LTV: non-residents are capped at 60% loan-to-value. If you establish Italian residency as part of the 7% flat tax application, you may access up to 80% LTV — but residency timing must be coordinated carefully.

Key differences from a standard expat mortgage

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Income documentation — foreign pension statements, tax assessments from home country, bank statements showing regular payments. Not all Italian banks have experience reading these correctly.

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Shorter loan terms — a 65-year-old applicant may only access a 10–15 year mortgage at banks that cap maturity at 75–80. This significantly increases the monthly payment vs. a 25-year term.

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Southern Italy locations — properties in smaller Southern towns may have lower valuations. The bank's appraisal will determine the LTV ceiling, which may be lower than expected for rural or coastal properties.

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Many buyers go cash — given these constraints, a large proportion of retirees buy outright. But if preserving liquidity matters, a mortgage is worth exploring — especially at current fixed rates.

FAQ

Pensioner flat tax — your questions

Does the 7% regime apply to a UK state pension?

UK state pensions paid by the UK government are generally foreign-source income and fall within the scope of the 7% regime. However, the UK-Italy tax treaty must be reviewed carefully — some UK government pensions may only be taxable in the UK under treaty provisions. An advisor with UK-Italy tax expertise should confirm your specific pension type before you rely on the 7% rate.

What about US Social Security income?

US Social Security falls within the 7% regime scope under Italian law. However, US citizens face additional complexity: the US taxes citizens on worldwide income regardless of residency. The Foreign Tax Credit may reduce double taxation, but the interaction between US and Italian rules requires a US-Italy specialist. This is not a regime to approach without professional tax advice on both sides.

Can I buy a vacation home in Southern Italy and keep primary residency elsewhere?

No — the 7% flat tax requires you to transfer your Italian tax residency to the qualifying municipality. It is not available for non-residents or people who split residency. If you want the tax benefit, your primary registered residence must be in the qualifying Southern Italian town. This affects the mortgage as well: you would access resident LTV conditions (up to 80%) rather than non-resident (60%).

Is there a minimum property value or mortgage amount for the Southern Italy locations?

The tax regime itself has no property value requirement. For the mortgage, standard Italian bank minimums apply — typically a property value above €150,000 and a loan amount above €75,000. In some smaller Southern Italian towns, finding a property above these thresholds at a price that justifies a mortgage (vs. outright purchase) is a practical consideration worth discussing upfront.

Planning to retire to Southern Italy?

The mortgage process for pensioners is specific — loan terms, income documentation, and the 7% timing all need to be aligned. Free 20-min call.

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Retiring to ItalyThe 7% Flat Tax for Foreign Pensioners