Foreign pension holders
The tax regime for foreign pension holders is a highly relevant topic, not only for Italian citizens but also for foreigners seeking tax benefits in Italy.
As we will see below, this benefit is granted to those who establish tax residency in certain designated territories. The regime consists of applying a substitute tax on personal income tax (Irpef) at a fixed rate of 7% on any category of income generated abroad, for each of the nine tax periods during which the option remains valid (Article 24-ter of the TUIR, introduced by Article 1, paragraph 273, of Law No. 145/2018).
Objective of This Tax Incentive
The primary aim of this tax benefit is to attract individuals holding capital and financial resources to southern Italian municipalities (Mezzogiorno) and/or areas affected by seismic events, encouraging them to invest in Italy.
This fiscal regime provides significant tax benefits and exemptions for foreign retirees receiving a foreign pension. However, before fully benefiting from these advantages, it is essential to understand the eligibility requirements and legal implications.
For this reason, consulting a tax lawyer (avvocato tributarista) or an accountant (commercialista) specialized in international taxation may be necessary to ensure compliance and maximize tax advantages.
Benefits of the article 24-ter tuir regime
Foreign pension holders who meet the requirements of the Article 24-ter TUIR regime benefit from the tax advantage of being able to pay a substitute tax on personal income tax (Irpef) and related local surcharges on foreign income of any category.
- The tax rate is fixed at 7% and applies for each tax year in which the option remains valid.
- The tax must be paid in a single installment within the deadline for the final balance of income tax payments.
- The substitute tax fully satisfies the tax obligation owed to the Italian State on foreign income, which means these earnings will not be subject to any additional substitute tax or withholding tax.
- Any withholding taxes already applied can be offset or refunded to prevent double taxation, as confirmed by the Italian Revenue Agency (Agenzia delle Entrate).
Who can benefit from the article 24-ter regime?
To qualify for the Article 24-ter regime, pensioners must meet the following requirements:
- Tax Residence in Italy
The applicant must transfer their tax residence to Italy and obtain registration at the civil registry (Anagrafe) of the Italian municipality where they intend to reside.
To qualify for the tax benefit, the tax residence must be established in one of the following locations:
- A municipality with fewer than 20,000 inhabitants located in one of these Italian regions:
Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise, Puglia;
- Or, a municipality with fewer than 3,000 inhabitants that was affected by seismic events, as listed in Annexes 1, 2, and 2-bis of Decree-Law 189/2016, covering the regions of Abruzzo, Marche, Umbria, and Lazio.
However, the “Sostegni Ter” decree (Dl 4/2022) has expanded the eligible beneficiaries of this favorable tax regime:
- Foreign pensioners can now also qualify if they move to municipalities affected by the 2009 L’Aquila earthquake.
- The 20,000-resident limit, previously applicable only to southern regions, is now extended to all eligible municipalities, including those affected by earthquakes, which were previously restricted to a 3,000-resident limit.
- The Italian Revenue Agency specifies that newly eligible towns now include places previously excluded, such as Camerino, Matelica, Tolentino, and Norcia.
For determining the population size of a municipality, the “Annual Municipal Survey on Population and Housing Movements” (Rilevazione comunale annuale del movimento e calcolo della popolazione) published by ISTAT is used. The relevant population data is that of January 1st of the year preceding the first period of validity of the option. This data remains valid throughout the entire period, as long as the taxpayer does not move to another municipality.
Additionally, the applicant must not have been a tax resident in Italy for at least five tax periods preceding the effective date of the tax benefit.
- Previous Residence in Eligible Countries
The applicant must have previously resided in a country that has an administrative cooperation agreement with Italy. This includes:
- EU Member States (which apply Directive 2011/16/EU on administrative cooperation in taxation).
- Countries that have a bilateral tax treaty with Italy, such as:
- Double Taxation Agreements (DTA)
- Tax Information Exchange Agreements (TIEA)
- OECD Multilateral Convention on Administrative Assistance in Tax Matters
- Holder of a Foreign Pension Income
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- The applicant must receive a pension from a foreign country, which is not subject to Italian taxation under international tax treaties.
- Both Italian and foreign citizens can apply, but the pension must be paid by a foreign institution.
- Those who receive only a pension from an Italian institution (such as INPS) do not qualify for this benefit.
- However, having both an Italian pension (INPS) and a foreign pension does not exclude eligibility.
How to Apply for the Foreign Pensioner Tax Regime
The application for this tax regime can be submitted directly through the income tax return for the tax period in which the applicant transferred their tax residence.
- The option remains valid for 9 additional tax periods after the initial application.
- The scheme has been available since 2019 and has a maximum duration of 10 tax years.
- Once the 10-year period expires, the taxpayer’s foreign income will once again be subject to standard Italian income tax (Irpef) and included in their total taxable income.
Typical scenarios / Case studies
The typical scenarios have been developed by drawing on the most significant corporate immigration cases that the firm regularly handles, with the aim of creating structured, complex examples that help the reader navigate their own situation. The case studies, by contrast, illustrate individual real-life matters, anonymised to protect client confidentiality, presented with full factual and contextual detail.
US professional chooses Italy: elective residence obtained and future planned
American professional obtains an elective residence visa while maintaining ties with the USA. Integrated assistance from legal strategy to property search..
US opera singer obtains work authorization in 7 days
American opera singer with contracts already signed with an Italian theatre. Self employment work authorization obtained on an urgent basis to meet professional commitments.
US client purchases property in Rome: secure transaction
American client assisted in the purchase of a property in Rome. Urban planning issues and contractual risks identified and resolved before signing, transaction completed through notarial power of attorney.
American investor: from New York to a villa in Tuscany
Cross-border property transaction with full relocation service. Purchase of a high-end property, with tax status, residency and NHS registration handled remotely.
Canadian couple, retirement property in Puglia
From Toronto to the Itria Valley. Purchase of a farmhouse with cadastral issues, 7% flat tax on foreign pensions, elective residence visa and healthcare transition.
British entrepreneur, opening a business in Milan
Post-Brexit, a London-based tech entrepreneur establishes an operational headquarters in Milan. Immigration pathway as a non-EU national, company incorporation, and tax planning.
Swiss retiree: 7% flat tax regime in Southern Italy
A banking executive relocates from Zurich to Calabria. Management of the Swiss occupational pension pillar, Italy-Switzerland Tax Convention, and deregistration from the cantonal tax register.
American couple: retirement project in Abruzzo with visa and flat tax
From Connecticut to Abruzzo. Elective residency visa, 7% flat tax coordinated with IRS and FATCA obligations, and transition from Medicare to the Italian NHS (SSN).
German couple, from Munich to Tropea
Retired engineers from the Bavarian automotive sector. Multi-tier pension management, Italy-Germany Tax Convention, and the 7% preferential tax regime.
Startup tech: apertura filiale italiana per il mercato EU
A Bay Area SaaS company establishes a Milan headquarters. Innovative startup SRL, EU Blue Card for the team, transfer pricing, impatriates tax regime, and GDPR compliance.
Fashion brand, representative office in Milan
Brand premium newyorkese apre presidio a Milano. Strutturazione per evitare stabile organizzazione, trasferimento direttrice creativa e gestione showroom.
Manufacturing company, ICT transfers to Italy
Multinazionale giapponese trasferisce 3 figure chiave in Piemonte. Permessi ICT per manager e specialista, coordinamento consolare e regime impatriati per tutti i dipendenti.
What is meant by pension income?
First and foremost, it is important to clarify that pension income is equated with employment income. According to Article 49, paragraph 2, letter A) of Presidential Decree 917/1986, “employment income includes pensions of any kind and allowances equivalent to them”.
Additionally, the Italian Revenue Agency (Agenzia delle Entrate) has specified that the concept of pension includes:
- All payments due after the termination of a work activity, even if they stem from a non-employee working relationship (e.g., pension benefits for former self-employed workers).
- One-time indemnities granted due to the payment of contributions, which may be received regardless of employment termination (e.g., lump-sum pension capitalizations).
What Is NOT Considered Pension Income?
- Voluntary insurance policies that are not linked to an employment relationship and do not guarantee the return of the capital paid.
How Is Foreign Pension Income Determined?
Income is classified as foreign-sourced using a “mirror approach”, meaning it follows the same criteria outlined in Article 23 of Presidential Decree 917/1986, which determines Italian-sourced income but applied in reverse.
According to this article, for non-residents, an income is considered produced in Italy when it can be linked to a source located within Italian territory. Conversely, foreign income is identified based on the exact opposite criteria.
Income Considered as Foreign-Sourced:
- Real estate income from land and buildings located abroad.
- Capital income paid by foreign states or non-resident entities.
- Employment income earned from work performed abroad.
- Self-employment income from activities carried out abroad through a fixed base.
- Business income from activities conducted through a permanent establishment abroad.
- Capital gains from the sale of shares in non-resident companies.
- Miscellaneous income derived from activities performed abroad and assets located abroad.
Final Considerations on the Foreign Pension Holder Regime
The foreign pension holder tax regime, as outlined in Article 24-ter of Presidential Decree 917/1986, provides an attractive opportunity for foreign retirees looking to relocate their tax residence to Italy.
However, it is essential to fully understand the requirements and implications of this tax legislation before making a decision. It is strongly advised to consult a tax professional or financial advisor to evaluate the most beneficial and suitable solution based on individual circumstances.
Boschetti Law Firm, through its commercial partners, is well-equipped to address these needs, offering a comprehensive package to assist its clients effectively.
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The 7% flat tax regime allows individuals receiving pensions from foreign entities to transfer their tax residence to a municipality in Southern Italy (with fewer than 20,000 inhabitants) and apply a 7% substitute tax on all foreign-source income for nine tax years.
Eligible municipalities are located in Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise, and Puglia, as well as certain municipalities affected by the 2009 earthquake. The regime applies to all categories of foreign-source income. The option is exercised in the tax return, indicating the chosen municipality of residence.
This is a potentially risky situation. Registration in the Italian population registry creates a presumption of tax residence in Italy, with the obligation to declare worldwide income. This presumption can be rebutted by demonstrating that tax residence is abroad, including through registration with the AIRE or under applicable double taxation treaties, but the burden of proof remains on the taxpayer.
The Italian Revenue Agency may assess these situations based on objective factors. The presence of personal or economic ties in Italy may affect the determination of tax residence. It is therefore advisable to define one’s tax position in advance and prepare adequate supporting documentation, also considering tools such as advance rulings.
Foreign nationals holding a residence permit for elective residence may enroll in the Italian National Health Service (SSN) on a voluntary basis, subject to payment of an annual contribution. Enrollment grants access to healthcare services under the same conditions as SSN beneficiaries, including general practitioners, specialist care, and hospital treatment.
The annual contribution is calculated based on total income and cannot be lower than €387.34. Alternatively, private health insurance may be used, provided it meets the requirements for residence in Italy.
The new residents regime (Art. 24-bis TUIR) provides for a flat tax of €200,000 per year on all foreign-source income, regardless of the amount. The inbound workers regime (Art. 16 of Legislative Decree 147/2015) allows a reduced taxation on employment income produced in Italy. They are designed for different profiles.
The new residents regime is suitable for individuals with very high foreign income who do not work in Italy. The inbound workers regime is intended for those who move to Italy for work and have not been tax resident there in the previous two years. They are only partially compatible. The choice should be made before relocating.
Because the Italian real estate market presents specific risks that foreign buyers may not be aware of: unauthorized building works not regularized, outstanding mortgages, cadastral discrepancies, landscape restrictions, and undisclosed easements. Technical and legal due diligence carried out before signing the preliminary agreement allows these issues to be identified while it is still possible to renegotiate or withdraw.
Specialized real estate advisory for foreign clients also includes urban planning checks, verification of systems compliance, independent property valuation, and assistance in negotiations. Purchasing without these checks exposes the buyer to unexpected costs and post-acquisition disputes.
