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Italy incentives: 7% tax rate on pension and foreign income for new tax residents

The retired migrant’s tax concessions program, Italy 2019

Italy has introduced favourable tax policies for those who want to retire in Italy, or move their tax residency to certain parts of Italy (applicable for returning Italians or new residents)

The exceptional news about the tax regulation is that it applies to all foreign source income.

So if you receive any foreign income at all while tax-resident in Italy, such as foreign pension income, company dividends income or royalties, or foreign interest income etc, it is subject only to a fixed and maximum rate of 7%.

In addition there is also an exemption from certain wealth taxes (or taxes on foreign-held assets), and no requirement to disclose the wealth that is held outside of Italy. This is a tax saving and also a time and cost saving related to reporting and administration usually required in annual tax declarations in Italy.

Transferring money or income to Italy will not trigger any tax charges or consequences (referred sometimes to the remittance rule in other countries when income is transferred in from abroad).

Already taxed in a foreign land on your pension of foreign income ?

It is also possible to ‘carve out’ or exclude certain incomes from the program, in order to achieve a credit for the foreign taxes already paid. (This applies where Italy has a double-tax agreement with that country). Note that Italy does have a tax treaty with 70 countries.

Who qualifies?

Applicants who are entitled to any pension income from a foreign country, and who move to one of Italy’s smaller municipalities, will be entitled if they qualify as follows;

  • The person applying (foreigner or Italian citizen) must not have been tax resident in Italy during the previous five tax years preceding the one in which residence is established;
  • The person must be entitled to a foreign pension from a private or public entity;
  • The foreign country for a new tax resident must have an administrative cooperation agreement (exchange of information) with Italy; and,
  • The retiree must move their tax residence to a municipality with a maximum of 20,000 residents in the regions of Sicily, Calabria, Sardinia, Campania, Basilicata, Puglia, Abruzzo, and Molise.

This concessional tax program continues to apply for a maximum of 9 years following the one in which the residence is established in Italy.

An election to utilise this tax treatment can be selected in the first year’s tax after residence has been established in Italy.    

It’s strongly recommended that you seek an initial assessment of your situation to ensure you qualify before you consider relocation.

Get in touch for any assistance and to obtain help to explore the program and buy eligible property in Southern Italy.

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All thoughts are my own. The information contained here is not personal financial advice tailored to individual needs.