Southern Italy Attracts With a 7% Tax Rate

Foreign pensioners: Southern Italy attracts with a 7% tax rate – reduced taxation for ten years

Pensioners receiving income from foreign sources may benefit from a 7% flat-rate tax by transferring their tax residence to Italy. This optional scheme, governed by Article 24-ter of the TUIR (the Italian Consolidated Income Tax Act) , applies to all categories of income generated abroad and may be applied for ten tax years: the year of transfer and the nine subsequent years.

This relief is reserved for those who have not been tax residents in Italy during the previous five tax years and who choose a municipality with no more than 30,000 inhabitants in Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise or Puglia. The new population limit, introduced by Article 26 of Law No. 34 of 11 March 2026 (published in the Official Gazette No. 68 of 23 March 2026) and in force from 7 April 2026, has replaced the previous threshold of 20,000 residents. The benefit is also granted, under the same demographic conditions, in municipalities affected by the earthquakes of 6 April 2009 (L’Aquila) and the 2016–2017 earthquakes in Central Italy (pursuant to Decree-Law 189/2016).

To verify the number of inhabitants, the ISTAT (Italian National Institute of Statistic) figures as at 1 January of the year preceding the start of the scheme are used. This figure remains valid for the entire duration of the scheme, unless the pensioner moves to another eligible municipality. From the second year onwards, the pensioner may change their place of residence by choosing another municipality that meets the specified requirements.

The option takes effect with the tax return for the year of the move. The taxpayer must indicate their last jurisdiction of tax residence, the country in which the pension-paying entity is based, the relevant foreign income and any countries they intend to exclude from the scheme.

The 7 per cent tax must be paid annually in a single instalment, by the deadline for settling income tax, using form F24 (tax code 1899). The option may be revoked, whilst entitlement to the benefit is forfeited if the requirements are no longer met or if payment is omitted or insufficient. It is possible to rectify the situation by the deadline for the final settlement of the following year, subject to payment of interest and penalties. Revocation and forfeiture prevent re-enrolment.

The refund introduced by the Sicilian Regional Government

Article 25 of Sicilian Regional Law/2026 grants, for a period of three years, a contribution equal to 50 per cent of the personal income tax (IRPEF) due and paid, up to 100,000 euros per annum. It is aimed at those who, between 2026 and 2028, transfer their residence and tax domicile from abroad to Sicily, receive income from employment or similar sources or pensions taxable in Italy, and purchase or renovate a property within twelve months. The allowance rises to 60 per cent for the purchase of a ‘ ’ property in a municipality with fewer than 5,000 inhabitants. This measure cannot be combined with the 7 per cent scheme.

It will be the practical application of the scheme that clarifies the full alignment between regional and national regulations.