Foreign retirees in Italy: how the 7% flat tax regime works and who qualifies

The 7% flat tax regime is a preferential tax scheme available to foreign retirees who transfer their tax residence to Italy. It allows the application of a 7% substitute tax on all foreign-source income (not only pensions), for up to 9 tax years (plus the year of transfer). The regime is available to individuals who: - receive a pension paid by a foreign entity - have not been tax resident in Italy for at least 5 years prior to the transfer - transfer their tax residence to a municipality with fewer than 20,000 inhabitants located in Southern Italy (Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise, Puglia) or in certain municipalities in Central Italy affected by earthquakes The option is exercised through the income tax return for the year in which the residence is transferred and allows, upon request, the exclusion of specific foreign countries from the scope of the substitute tax.

Residence in Italy for registry purposes but tax residence abroad: is it possible and what are the implications?

This is a delicate and potentially risky situation. Under Italian law (Art. 2 TUIR), individuals are considered tax resident if, for most of the year, they are registered in the Italian population registry or have domicile or residence in Italy. Being registered in Italy is therefore a strong legal indicator of tax residence. It can be challenged, but the burden of proof lies with the taxpayer, who must demonstrate that their center of vital interests and habitual abode are abroad, also considering applicable double tax treaties.

Health insurance card for foreigners with elective residence: how to obtain it and what it covers

Foreign nationals holding a residence permit for elective residence may enroll in the Italian National Health Service (SSN) on a voluntary basis, subject to the payment of an annual contribution. Enrollment allows them to obtain the health insurance card and access the same healthcare services provided to Italian citizens, including a general practitioner, specialist visits, and hospital care. The annual contribution is calculated based on total income, with a minimum amount of approximately €387.34. Alternatively, private health insurance coverage may be maintained.

Tax benefits

Special tax regime for inbound workers

Article 16 of Legislative Decree no. 147/2015 introduced, starting from the 2016 tax year, the so-called “special tax regime for inbound workers” in order to encourage the transfer to Italy of highly skilled and qualified workers, thus fostering the technological, scientific, and cultural development of our country.

The inbound workers tax regime provides tax benefits not only for Italians returning to their country but also for foreigners in Italy, consisting of a reduced taxation regime on income produced in the national territory.

An essential requirement to benefit from the inbound workers regime is to have transferred one’s tax residence to Italy, committing to reside there for a set number of tax periods while carrying out work activity mainly within Italian territory.

This tax relief scheme for foreigners in Italy, or for Italians returning from abroad, has undergone subsequent amendments. Initially, the law provided for a 50% tax exemption on income produced in Italy in favor of the following categories of workers:

• managers and highly qualified and specialized workers;

• inbound workers holding a university degree;

• inbound self-employed workers.

Starting from 2019, with Article 5 of Decree-Law no. 34/2019, the percentage of tax exemption increased from 50% to 70%.

Subsequently, for workers who transfer their residence to the southern regions of Italy, an even more favorable 90% exemption was introduced.

With Article 5 of Legislative Decree no. 209/2023, effective from 2024, the incentive for new beneficiaries was amended again: taxable income is now set at 50% for five tax periods, with a maximum eligible income threshold of €600,000 per year. The exemption rises to 60% if the worker moves to Italy with at least one minor child or if a birth takes place during the period of application of the regime.

The new regime also provides for stricter requirements: not having been a tax resident in Italy for the previous three tax periods (instead of the previous two) and a commitment to reside in Italy for at least four years.

Subjective requirements to benefit from the inbound workers regime from 2024

To be eligible, inbound workers from 2024 must meet the following requirements:

• Qualification: possess the requirements of high qualification or specialization as defined by Legislative Decree of 28 June 2012, no. 108 and Legislative Decree of 9 November 2007, no. 206, according to the criteria of Article 27-quater of the Consolidated Immigration Act, as subsequently amended by Legislative Decree of 18 October 2023, no. 152.

• Tax residence: the person must not have been a tax resident in Italy during the 3 tax periods preceding the transfer. However, the required periods of non-residence increase to 6 if the worker is hired in Italy by the same employer for whom they worked abroad or by a company belonging to the same group (as defined by Article 2359 of the Civil Code). The required periods increase to 7 if, in addition, before their transfer abroad, the worker was employed in Italy by the same employer or by a company belonging to the same group.

• Duration: to benefit from the regime, the worker must commit to being a tax resident in Italy for at least four years.

• Work carried out mainly in Italy: work activity must be carried out for the majority of the tax period within the territory of the Italian State.

It is important to note that both foreign and Italian citizens can access these tax benefits.

From the perspective of subjective requirements, the new regime requires possession of high qualification or specialization, which can alternatively be demonstrated through:

• possession of a higher education qualification certifying the completion of a course of study of at least three years;

• a higher professional qualification falling within levels 1, 2 or 3 of the ISTAT classification of professions CP 2011;

• possession of the requirements provided by Legislative Decree of 6 November 2007, no. 206, for regulated professions;

• a higher professional qualification proven by at least five years of relevant professional experience;

• for ICT managers and specialists, a qualification proven by at least three years of experience in the last seven years.

Objective requirements to qualify for the inbound worker regime

The income covered by the inbound workers tax regime includes:

• employment and equivalent income;

• self-employment income deriving from the exercise of arts and professions;

• business income is excluded starting from 2024, as already mentioned.

Eligible income is subject to a maximum annual limit of €600,000, beyond which the benefit does not apply.

Income produced abroad remains excluded, bearing in mind that employment and self-employment income are considered produced in Italy if the work is performed in Italy, even if carried out for foreign entities and remunerated from abroad.

Requirement of “prevalence”: the work activity must be performed for most of the tax period within Italian territory. This requirement is considered fulfilled when the activity is carried out mainly in Italy, although the legislation does not specify an exact numerical threshold of days, unlike the general criteria for tax residence.

In the case where work is carried out in smart working, the place where the worker is physically present when performing the activity for which they are remunerated is considered the place of work performance. This principle makes it possible to access the inbound workers regime even when working remotely for foreign employers, provided that the work is physically performed from within Italian territory.

Also included is income deriving from work activities undertaken after moving to Italy, thus allowing beneficiaries to enjoy the tax relief even for new activities started after transferring tax residence to Italy.

The inbound workers regime in Italy for business income until 2023

Under the previous regime, which applied until 2023, the inbound workers regime was not limited to employment income but also extended to the business income of individual entrepreneurs.

It is important to specify that the benefit applied exclusively to business income produced by an individual through the exercise of business activity in a sole proprietorship, as provided by Article 2082 of the Italian Civil Code. Business income produced by partnerships and attributed transparently to each partner, as well as business income of closely held limited liability companies whose shareholders are exclusively natural persons, were excluded from the benefit.

This policy aimed to attract highly qualified workers from abroad, including those intending to start individual entrepreneurial activities in Italy, encouraging the creation of new economic initiatives and stimulating the development of the national production system.

Through this regime, qualified workers coming from abroad who started an individual business activity in Italy could benefit from significant tax advantages designed to incentivize investment in our country.

From 2024, business income of any kind no longer benefits from the tax relief under the inbound workers regime, representing one of the main changes introduced by the new Legislative Decree no. 209/2023.

The new regime applies exclusively to employment and equivalent income, as well as self-employment income deriving from the exercise of arts and professions, with a maximum eligible annual income threshold of €600,000.

Important note: individuals who transferred their registered residence by 31 December 2023 continue to apply the previous, more favorable regime, including the possible benefit on individual business income, while the new regime under Legislative Decree no. 209/2023 applies only to those who transfer residence as of 1 January 2024.

What are the benefits of the inbound worker regime?

Adhering to the inbound workers regime offers the advantage of reduced taxation: as of 2024, inbound individuals meeting the requirements of high qualification or specialization may benefit from the new tax relief regime, which provides for taxable income equal to 50% starting from the tax period in which the worker transfers their tax residence to Italy and for the following four tax periods.

The benefit applies to employment, equivalent, and self-employment income deriving from the exercise of arts and professions produced in Italy, up to a maximum annual limit of €600,000.

For workers who move to Italy with at least one minor child or who become parents during the benefit period, the relief is even more advantageous: taxable income is reduced to 40% (a 60% exemption).

Compared to the previous regime, which granted a 70% exemption until 2023, the new system has stricter conditions but still provides a significant tax advantage to attract qualified workers from abroad.

Extension of tax benefits under the inbound workers regime until 2023

Under the previous regime, tax benefits on employment, equivalent, and self-employment income could be automatically extended for an additional five tax periods if at least one of the following conditions was met:

• workers with at least one minor child or dependent child, including those in pre-adoptive foster care;

• workers who became owners of at least one residential property unit in Italy, after transferring their residence or within the previous 12 months. The property could be purchased directly by the inbound worker or by their spouse, partner, or children, even in co-ownership.

During the five-year extension period, eligible income contributed to taxable income at 50% of its amount, and this percentage was reduced to 10% for workers with at least three minor or dependent children, including those in pre-adoptive foster care.

It is important to note that this automatic extension was provided for under the regime in effect until 2023, while the new regime introduced from 2024 no longer provides for this possibility of automatic extension for the second five-year period.

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.

Relocation

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..

Application completed in approximately 3 months without additional requests

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Business

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.

Work authorization issued within 7 days from submission of the application

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Real Estate

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.

Purchase completed within one month, entirely managed remotely

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Business

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.

Complete relocation service, from property due diligence to handing over the keys

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Retirement

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.

7% flat tax activated, cadastral issues resolved before the deed of sale

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Business

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.

European operational hub established with self-employment visa successfully obtained

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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.

7% flat tax activated on all foreign-sourced income

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Retirement

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).

7% flat tax activated on Social Security and 401(k) pension income

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Relocation

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.

Three German pension pillars optimised with Italian flat tax

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Business

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.

Operational within 5 months, payroll cost −35% with impatriates tax regime

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Business

Fashion brand, representative office in Milan

Brand premium newyorkese apre presidio a Milano. Strutturazione per evitare stabile organizzazione, trasferimento direttrice creativa e gestione showroom.

Rischio stabile organizzazione prevenuto, presidio EU operativo

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Corporate

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.

3 trasferimenti completati in 4 mesi e mezzo, linea produttiva avviata nei tempi previsti

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Tax benefits for foreigners purchasing real estate in Italy

An inbound worker (Italian or foreign) who purchases a property in Italy to be used as their main residence and transfers their tax residence from 2024 can obtain significant additional tax benefits; this refers to the extension of the inbound workers regime benefit for a further three tax periods.

To benefit from this extension, the residential property must have been acquired by 31 December 2023 and, in any case, within twelve months prior to transferring tax residence to Italy. The property must be used as the main residence.

During the three-year extension, eligible income contributes to taxable income with a 50% inclusion rate (reduced to 40% for workers with at least one minor dependent child or who become parents during the benefit period).

This extension is added to the five base years of the new inbound workers regime, bringing the total duration of the benefit to eight years for those who meet both the base regime requirements (high qualification or specialization) and the property purchase condition.

It is important to emphasize that, unlike the previous regime, this extension is no longer automatic for a second five-year period but is limited to only three additional years and is subject to the purchase of the property within the specified time limits.

How to apply for the inbound worker regime

The individual concerned must prepare all the required documentation to demonstrate compliance with the eligibility requirements. This documentation may vary depending on the applicable regime (pre-2024 or from 2024) and the person’s individual circumstances, but may include documents such as:

• certificate of residence abroad or registration with AIRE (Registry of Italians Resident Abroad);

• diplomas, professional qualification certificates, or certifications proving high qualification or specialization;

• employment contracts or employer statements;

• for non-EU citizens: documentation relating to double taxation treaties between Italy and the country of origin;

• for the regime applicable from 2024: any documentation relating to the purchase of residential properties for the purpose of obtaining extensions.

Employees must submit a timely written request to their employer in the form of a self-declaration pursuant to Presidential Decree no. 445 of 2000. It is essential to submit the request during the tax period in which tax residence is transferred, as delays could preclude access to the regime. The employer can then apply the benefit directly in the employee’s payslip.

Self-employed workers can access the regime when filing their income tax return, completing the appropriate section in the RE schedule of the “Redditi Persone Fisiche” tax return form.

If the employer was unable to apply the benefit, the taxpayer can still claim it directly in their tax return, provided all legal requirements are met.

Given the complexity of Italian tax legislation and the differences between the previous regime and the new regime applicable from 2024, it is strongly recommended to rely on a professional tax advisor to ensure proper access to and use of the available benefits.

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Foreign pensioners in Italy: how the 7% flat tax regime works and who can access it

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.

Registered residence in Italy but tax residence abroad: is it possible and what does it imply?

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.

Health card for foreign nationals with elective residence: how to obtain it and what it covers?

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.

New residents regime vs inbound workers regime: which is more advantageous and what are the requirements?

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.

Relocation: why are due diligence and real estate advisory crucial before purchasing?

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.