German couple, from Munich to Tropea
Representative scenario based on our consolidated experience with international investors. The details reflect the type of transactions handled by our Law Firm for clients with a similar profile.
After thirty years in the Bavarian engineering sector, a retired German couple decided to relocate to a well known seaside destination in Calabria. A project that European freedom of movement makes seemingly simple, yet in reality presents significant complexities: the multi level German pension system (gesetzliche Rente, Betriebsrente, Riester Rente) generates different tax implications in each jurisdiction; Germany retains a limited right of taxation over pensions even after relocation; the Italy Germany Double Tax Treaty requires careful application to avoid double taxation; and access to the Italian 7 percent flat tax regime for foreign pensioners, with its requirement of residence in municipalities with fewer than 20,000 inhabitants, must be verified and coordinated with deregistration from the German Einwohnermeldeamt and Finanzamt. Without rigorous planning, such a relocation risks producing a higher overall tax burden rather than a lower one.
The client
A couple of German citizens residing in Munich, both engineers who retired after thirty-year careers with leading companies in the Bavarian automotive sector. Their income profile is diversified across several sources: the statutory pension (gesetzliche Rente) paid by the Deutsche Rentenversicherung, an occupational pension (Betriebsrente/betriebliche Altersvorsorge) accrued with their employer, a Riester pension plan currently in the payout phase, and an investment portfolio managed by a German bank that includes funds, bonds, and a share of income-producing real estate in Germany.
For years they have spent extended periods in Southern Italy, eventually deciding to relocate permanently to Tropea, attracted by the climate and the distinctive character of the town. Their plan involves purchasing a villa on the outskirts of the city, transferring their residence, and optimizing their overall tax position with respect to pensions and capital income.
The challenge
The relocation of German pensioners to Italy, although facilitated by European freedom of movement which removes the need for visas and residence permits, involves specific tax and social security complexities that make it far from automatic.
German tax complexity
- Germany may apply beschränkte Steuerpflicht to German source income received by non residents; however, the actual taxing rights on pensions must be assessed under the Italy Germany Double Tax Treaty. The German statutory pension (gesetzliche Rente) is a social security pension governed by Article 19 paragraph 4 of the Treaty: for a beneficiary holding only German citizenship it is taxable exclusively in Germany, and the German taxable portion (Besteuerungsanteil) reaches 83.5 percent for pensioners in 2025 and 84 percent for pensioners in 2026.
- Occupational pensions (Betriebsrente) and Riester annuities may follow rules different from the statutory pension and require separate analysis under domestic law and the Treaty.
- Deregistration (Abmeldung) and the management of tax formalities must be coordinated, yet the cessation of German tax residence depends primarily on factual circumstances (absence of an available dwelling and of habitual abode), not solely on formal deregistration.
- In the year of relocation, a German tax return may be required with mixed treatment of periods and related adjustments.
- Rental income from property located in Germany remains taxable in Germany; in Italy, if the individuals qualify as tax resident, such income must be reported and double taxation is generally mitigated through a foreign tax credit within statutory limits. The couple may choose whether to include German real estate income in the 7 percent flat tax or to exclude it in order to claim a foreign tax credit for taxes paid in Germany, depending on which option proves more advantageous.
Complexity of the Italian preferential regime
- The 7 percent substitute tax regime requires relocation to municipalities with fewer than 20,000 inhabitants: before selecting the place of residence, a detailed demographic analysis is necessary to identify eligible municipalities
- It is essential to verify the absence of Italian tax residence in the five tax years preceding relocation, a condition not automatically satisfied for a couple who had frequently stayed in Italy and may have exceeded 183 days of presence in previous years
- Each category of German income must be classified for the purposes of the regime: the statutory pension, the occupational pension, the Riester annuity and investment income each require specific analysis to determine whether they fall within the scope of the substitute tax
- The 7 percent regime (Article 24 ter of the Italian Income Tax Code) generally provides exemption from foreign asset reporting obligations (RW form) and from Italian wealth taxes on foreign assets (IVIE and IVAFE) in relation to assets generating income subject to the substitute tax
Real estate and administrative complexity
- The real estate market in Calabria shows high values and strong competition from international buyers: due diligence requires particular attention to coastal or sea view properties, often subject to landscape restrictions under the Cultural Heritage Code and to restrictive municipal rules on external alterations
- Healthcare transition from the German Krankenversicherung (mandatory health insurance) to the Italian National Health Service: Germany allows pensioners residing abroad to maintain coverage under KVdR, but with territorial limitations that significantly reduce its practical usefulness
- Coordination between German deregistration and Italian registration to avoid gaps in social security and healthcare coverage
The ItalyVisaInvestments.com solution
In this case, the Law Firm would structure an integrated pathway prioritizing cross-border tax planning – an essential element for the economic sustainability of the relocation – while coordinating it with the real estate acquisition and the administrative requirements in both countries.
- Tax analysis and comparative simulation
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- Comprehensive mapping of the couple’s income sources and analysis of the tax treatment of each under the Italy Germany Double Tax Treaty: the gesetzliche Rente (social security pension, Article 19 paragraph 4, taxable only in Germany for exclusively German citizens), the Betriebsrente and Riester annuity (private pensions, Article 18, taxable exclusively in Italy as State of residence), capital income and German real estate income (Articles 10, 11, 13 and 6, with analysis of available options)
- Detailed comparative tax simulation: comparison between the overall burden in Munich (federal Einkommensteuer plus Kirchensteuer plus Solidaritätszuschlag) and the expected burden in Italy under the 7 percent regime, including residual German taxation on statutory pensions
- Identification of suitable sea view municipalities in Calabria eligible for the 7 percent regime: demographic analysis based on official data to identify those below the 20,000 inhabitant threshold with location and services compatible with the couple’s needs
- Verification of the absence of Italian tax residence in the previous five years: analysis of historical periods of presence and possible factual residence
- Formal exercise of the option for the preferential regime in the Italian tax return for the year of relocation, including the mandatory indication of requirements and foreign source income
- Coordination with German authorities and advisers
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- Coordination with the couple’s German Steuerberater for the management of the final German tax return in the year of relocation and the closure of tax positions with the Munich Finanzamt
- Preparation of documentation for deregistration with the Einwohnermeldeamt and notification of the new foreign address to Deutsche Rentenversicherung to ensure correct pension payments abroad
- Verification of the application of the Italy Germany Treaty to the pensions received and, where applicable, activation of the procedures provided by the German tax authorities for limitation or exemption of taxation in Germany
- Analysis of the tax consequences connected with the cessation of German tax residence in relation to financial assets, including assessment of the possible application of German exit tax rules (Wegzugsbesteuerung), with particular reference to substantial shareholdings under domestic law, and evaluation of tax effects on the portfolio following relocation
- Real estate acquisition
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- Assistance in the search and selection of the property in Tropea, including verification of compliance with urban planning and habitability requirements
- In depth due diligence: land registry and mortgage searches, verification of building compliance, assessment of landscape restrictions and legality of prior renovations, particularly relevant for sea view villas
- Coordination with local professionals for inspections, valuation report and verification of energy classification
- Drafting of the purchase offer with suspensive clauses, negotiation of the preliminary agreement and assistance through to the notarial deed
- Management of financial transfers from the German bank account to the notarial escrow account
- Administrative formalities and healthcare transition
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- Obtaining Italian tax codes for both spouses and opening of an Italian bank account
- Registration with the local municipality as European Union citizens, with acquisition of registered residence pursuant to Legislative Decree 30 of 2007 and subsequent Italian tax residence
- Notification to the German health insurance fund of the cessation of residence and assessment of options, maintenance of KVdR with limitations or termination and enrolment in the Italian National Health Service
- Registration with the Italian National Health Service through form S1 (formerly E121) issued by the German social security institution, allowing EU pensioners to access the healthcare system of the State of residence at the expense of the State paying the pension
- Selection of a general practitioner, guidance on the local hospital network and activation of utilities
The result
The operation would unfold over approximately five months, from the initial consultation to the couple’s effective relocation to a villa in Tropea.
- Option to apply the 7% substitute tax regime exercised in the income tax return, provided that the requirements set out in Article 24-ter of the Italian Income Tax Code are met, in a municipality that satisfies both the demographic criteria and the couple’s residential expectations. The regime applies for 10 tax years
- Significant overall tax savings compared to Bavarian taxation: the total tax burden resulting from the application of the Italian 7% substitute tax, together with any taxation potentially due in Germany under the Double Taxation Convention, would be substantially lower than the previous overall tax burden in Munich
- Successful deregistration without objections from the German tax authorities regarding cessation of residence, thanks to the documentation prepared to demonstrate the genuine nature of the relocation
- Activation of the administrative procedures required for the application of the Double Tax Treaty, eliminating instances of double taxation on income components allocated to Italian jurisdiction
- Real estate acquisition completed with full legal security, following resolution of issues related to landscape restrictions affecting part of the property
- Healthcare coverage ensured without interruption through form S1 issued by the competent German insurance institution, with registration in the Italian National Health Service at the expense of the German State and without additional contribution costs for the couple
The couple relocates to their villa in Tropea, finding a situation already fully operational: property ownership, residency, the preferential tax regime in place, pensions correctly paid abroad, healthcare coverage, and German tax positions properly closed.
What clients tell us in similar transactions
“We thought that moving to Italy as European citizens would be simple, no visas, no permits, freedom of movement. In reality, the tax side proved far more complex than we imagined. The German pension that continues to be taxed in Germany, the Betriebsrente with different rules, the Finanzamt wanting to verify that the relocation was genuine, the Italian 7 percent regime requiring a specific municipality: without someone who deeply understood both systems we would have risked paying more tax than before. The Law Firm coordinated everything, from our Steuerberater in Munich to the Italian Revenue Agency, and today we live by the sea with a tax burden we would never have thought possible.”
ItalyVisaInvestments.com Team
Transactions of this complexity are handled in a coordinated manner by the departments of the Law Firm, ensuring a single direction across all aspects of the engagement:
- International tax advisory, for Italy Germany cross border planning, access to the 7 percent regime, comparative simulation, coordination with the German Steuerberater and management of procedures with the Finanzamt Neubrandenburg (RIA) for certification of the Rentenfreibetrag and the taxable portion of German pensions
- Corporate and Real Estate department, for real estate due diligence in Calabria, negotiation structuring and notarial coordination
- Immigration and Relocation department, for registration formalities as EU resident citizens and coordination of German deregistration
- Relocation operations team, for healthcare transition through form S1, logistical management of the move and routine administrative formalities
Project management would be entrusted to a single point of contact responsible for coordinating all the professionals involved and for keeping the clients continuously updated on timelines, costs, and progress.
Do you have a similar situation?
If you are a pensioner resident in Germany and considering relocation to Italy, it is essential to rely on a team capable of:
- analysing the tax treatment of each component of the German pension system (gesetzliche Rente, Betriebsrente, Riester) under the Italy Germany Double Tax Treaty
- conducting a comparative tax simulation between the German burden and the Italian burden under the 7 percent regime, identifying the suitable municipality
- coordinating German deregistration and closure of positions with the Finanzamt with the establishment of Italian tax residence
- requesting from the Finanzamt Neubrandenburg (RIA) certification of the Rentenfreibetrag and the taxable portion of the pension, necessary to correctly apply the Treaty and eliminate double taxation on income components allocated to Italy
- activating healthcare coverage in Italy through form S1, without interruption of protection
- conducting rigorous real estate due diligence and assisting in the purchase, including management of landscape and urban planning restrictions
Our Law Firm assists German pensioners and pensioners from other European countries in relocating to Italy with optimised tax planning, ensuring full compliance with the laws of both jurisdictions and providing a single point of contact for every stage of the transaction.
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