Pay Only 7% Tax in Italy? Here’s How (and Where) It Works
If you’re dreaming about retiring to Italy, waking up to hilltop views, sipping espresso in a sunny piazza, and paying only 7% tax on all your foreign income, you’re in luck.
Italy’s 7% flat tax regime is one of the most attractive tax incentives in Europe for retirees moving from abroad. For ten years, you can pay a flat 7% on pensions, rental income, dividends, and capital gains earned outside Italy.
Below, we break down how the 7% flat tax works, who qualifies, what income is included, which regions and towns (including Le Marche) are eligible, and what happens after the 10-year period ends.
What Is the 7% Flat-Tax Regime?
The 7% flat tax regime (Art. 24-ter of the Italian Tax Code) was introduced in 2019 to attract retirees from abroad and repopulate small Italian towns.
If you qualify and move to an eligible municipality, Italy lets you replace its usual progressive tax system (23%–43%) with a simple 7% substitute tax on all foreign-sourced income for 10 years.
This includes not just pensions, but also passive income like stocks, shares, property abroad, and investment returns.
Who Qualifies for the 7% Flat Tax?
To use the 7% tax incentive, you must:
✔️ Receive a foreign pension: Public or private, as long as the payer is outside Italy.
✔️ Not have been an Italian tax resident for the previous 5 tax years
✔️ Move to a qualifying municipality: These are mostly in southern Italy, plus designated earthquake-affected towns in central Italy (including parts of Le Marche).
✔️ Elect the regime in your tax return: You choose the 7% regime when you file your first Italian tax return after moving.
What Income Is Taxed at 7%? (It’s Not Just Pensions)
Once accepted, you’ll pay 7% on almost all foreign income, including:
✅ Foreign pensions
✅ Dividends and interest from foreign investments
✅ Capital gains from selling foreign shares/assets
✅ Rental income from properties abroad
✅ Self-employment/business income abroad (case-by-case)
What’s not included?
❌ Income generated in Italy
❌ Rental income from Italian properties
❌ Italian employment or freelance income
❌ Interest or gains from Italian bank accounts or investments
❌ Italian-source income is taxed under Italy’s normal tax rules.
Where Can You Move? Regions Eligible for the 7% Flat Tax
Southern Regions (all require towns under 20,000 residents)
📍 Sicily
📍 Calabria
📍 Sardinia
📍 Campania
📍 Basilicata
📍 Abruzzo
📍 Molise
📍 Puglia
📍 Marche
📍 Umbria
📍 Lazio
📍 Abruzzo (specific inland municipalities)
Towns in Le Marche That Qualify
If you love the Adriatic coastline, medieval hill towns, and authentic Italian living, Le Marche is a beautiful region to consider.
Here are some example towns in Le Marche that fall under the scheme:
✅ Montedinove (Ascoli Piceno)
✅ Tolentino (Macerata)
✅ Urbisaglia (Macerata)
✅ Servigliano (Fermo)
✅ Smerillo (Fermo)
👍 (Always check legal updates — population limits and lists can change.)
How Long Does the 7% Scheme Last?
The regime lasts for 10 tax years. After that, you automatically revert to the normal Italian tax system (IRPEF).
This is where planning becomes important…
What Happens After 10 Years?
Once the 10-year 7% flat-tax period ends, you switch to Italy’s progressive tax system, where residents are taxed on worldwide income.
IRPEF (national income tax) rates for 2024–2025:
– 23% on income up to €28,000
– 35% from €28,001 to €50,000
– 43% on income over €50,000
Plus:
– Regional surtax: ~1.23% to ~3.33% (varies by region)
– Municipal surtax: ~0% to ~0.9% (varies by town)
So your effective tax rate after your ten golden years can rise to the mid-40% range — which is why many retirees plan ahead by reviewing their income mix or choosing regions with lower surtaxes.
📌 Official reference (English):
Agenzia delle Entrate – Personal Income Tax Rates
Do You Get Healthcare Under the 7% Regime?
You don’t automatically get free healthcare, but as an Italian legal resident, you can register with the SSN (Servizio Sanitario Nazionale).
– EU and UK pensioners: can often use the S1 form to access the SSN with no extra cost.
– Non-EU retirees: may need to pay an annual SSN contribution or use private insurance.
Once registered, you receive the Tessera Sanitaria, which gives access to public GP care, hospitals, and prescriptions.
Benefits of the 7% Flat Tax Regime
✔️ Only 7% tax on all foreign income
✔️ Covers pensions, dividends, rental income, investments
✔️ No Italian wealth tax on foreign assets (in most cases)
✔️ Simple, predictable tax structure for a decade
✔️ Encourages living in beautiful, peaceful Italian villages
Things to Watch Out For
– You must actually move and be resident in Italy.
– Only foreign-sourced income qualifies.
– Some retirees may still owe tax in their home country — check your double taxation agreement.
– The 7% scheme cannot be renewed or extended.
– Healthcare rules depend on nationality and residence type.
Final Thoughts: Is the 7% Flat Tax Worth It?
For most foreign retirees, yes – the Italian 7% flat tax is one of the most financially attractive relocation incentives in Europe.
You get ten years of low, simple tax on your foreign income while enjoying all the benefits of retirement in Italy: slower living, stunning landscapes, rich culture, and welcoming communities.
Just remember to:
✅ Choose your town carefully
✅ Check you meet all the criteria
✅ Plan for the post-10-year tax period
✅ Register properly for healthcare
✅ Take professional tax advice
Thinking of Making the Move?
🇮🇹 The information in this guide is correct right now, but Italy’s rules around tax, residency, and property change all the time.
👍 That’s why so much of the advice you find online (especially in Facebook groups) is either out of date, misinterpreted, or completely contradictory.
✅ At our Move to Italy Retreat, you don’t just get the latest rules explained by trusted professionals, you meet the actual experts (lawyers, accountants, realtors, architects) who helped us navigate Italy. These are the people who live and breathe this stuff every day.
✅ Better yet, they don’t disappear after the retreat.
✅ They become the kind of contacts, and often friends, who will keep you in the loop, answer your questions, and guide you long after you’ve flown home.
🇮🇹 If you’re serious about moving to Italy, this is the closest you’ll get to having your own Italian support team.
