Optional 7% Flat Tax Regime for Foreign Pensioners
- Apr 22
- 3 min read
Individuals receiving pension income paid by foreign entities who transfer their tax residence to Italy—specifically to one of the municipalities located in the regions of Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise, and Puglia, with a population not exceeding 30,000 inhabitants—may benefit from an optional tax regime applying a 7% substitute tax on any category of foreign‑source income for each of the nine tax years in which the option is valid (Article 24‑ter of the Italian Income Tax Code – TUIR, introduced by Law No. 145/2018, Article 1, paragraph 273). The threshold was recently expanded: Law No. 34/2026, in force since 7 April 2026, increased the population limit from 20,000 to 30,000 inhabitants, thereby widening the number of eligible municipalities.
The Sostegni Ter Decree (Decree‑Law 4/2022) broadened the scope of beneficiaries even further. The regime is now also available to foreign pensioners who move to municipalities affected by the L’Aquila earthquake of 6 April 2009.
Additionally, the previous population limit of 20,000 inhabitants—originally applicable only to municipalities in Southern Italy—has been extended to all eligible municipalities, including those hit by seismic events, which were previously restricted to a maximum of 3,000 inhabitants. As a result, several towns previously excluded now fall within the scope of the regime, such as Camerino, Matelica, Tolentino, and Norcia.
To determine whether a municipality meets the population requirement, the relevant figure is the one published by ISTAT in the “Annual Municipal Survey of Population Movements and Population Count”, referring to 1 January of the year preceding the first tax period in which the option applies.
This population figure remains valid for the entire duration of the option, unless the taxpayer moves to another municipality.
If the taxpayer relocates to another eligible municipality starting from the second year of the regime, the relevant population figure is the one recorded on 1 January of the year before the move.
The option becomes effective when the taxpayer files the income tax return for the year in which they transferred their tax residence to Italy. In the return, the taxpayer must indicate:
non‑resident status in Italy for at least five tax years prior to the start of the option
the jurisdiction (among those with administrative cooperation agreements) where they had their last tax residence before the option
any foreign states for which they do not wish to apply the substitute tax
the country of residence of the foreign entity paying the pension
the amount of foreign‑source income subject to the substitute tax
The 7% substitute tax on foreign‑source income must be paid annually, in a single instalment, by the deadline for the balance of income taxes. Payment is made via the F24 form, using tax code 1899, established by Resolution No. 19 of 21 April 2020.
The option may be revoked in any tax year following the first, by notifying the revocation in the tax return for the last year of validity. Effects already produced in previous years remain valid.
The regime does not apply if the legal requirements are found to be missing, and it ceases if the requirements are no longer met.
The taxpayer also loses access to the regime in case of omitted or partial payment of the substitute tax, unless the omission is remedied by the deadline for the tax balance of the following year (interest and penalties still apply).
Both revocation and loss of eligibility prevent the taxpayer from exercising the option again in the future.
Further info can also be found in the official link of the Italian Tax office (Agenzia delle Entrate):
Get in touch for any question! - mail@arcalenis.com.
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