Retiring to Italy?

How to Pay Just 7% Tax on Your Pensions

A five-step guide to one of Italy’s most attractive tax incentives for foreign retirees

If you’ve spent your working life in the UK diligently building your pension, you may already know the unfortunate reality: if you don’t spend it, a significant portion may ultimately return to HMRC.

But what if there were a way to enjoy more of your retirement income—somewhere warmer, slower-paced, and far more tax efficient?

Italy’s Regime per Pensionati Esteri—commonly referred to as the 7% Flat Tax Regime for Foreign Pensioners—offers just that. It allows eligible individuals to pay a flat 7% tax on foreign pension and overseas income for up to 10 years. No sliding scale, no stealth levies—just a clear, attractive rate.

So, how does it work? And what do you need to do to qualify?

Step 1: Check Your Eligibility

This regime isn’t available to everyone, but if you're British with pension income and some flexibility on where you live, you may well qualify. Here’s what’s required:

  • You receive a foreign pension
    This includes your UK State Pension, personal pensions, and occupational schemes.
    (Note: Income from ISAs, onshore bonds, and Italian pensions does not qualify.)

  • You haven’t recently lived in Italy
    You must not have been an Italian tax resident in the five tax years prior to your move. Italy is welcoming new residents—but not returnees.

  • You relocate to a qualifying municipality
    The regime is available only in towns with fewer than 20,000 residents in southern regions such as Sicily, Calabria, Sardinia, Apulia, Basilicata, Campania, Molise, and Abruzzo, or in certain earthquake-affected municipalities in Umbria, Marche, and Lazio.
    (Think: quiet hill towns, local markets, and Mediterranean charm.)

  • You register correctly
    You must obtain a Codice Fiscale (Italian tax code) and register as a resident (Anagrafe della Popolazione Residente) at your local town hall. Paperwork is essential—get this right from the outset.

Step 2: Establish Italian Tax Residency

To benefit from the regime, you must become tax resident in Italy by meeting all of the following criteria:

  • Spend at least 183 days per year in Italy

  • Move your centre of vital interests—such as your main home, personal ties, and daily life—to Italy

  • Be formally listed in the Anagrafe (resident population registry)

Step 3: Elect the 7% Regime

There is no standalone application form or certificate. You must simply elect the regime through your first Italian tax return.

Timing is critical. If you fail to elect the regime in that initial return, the opportunity is lost permanently.

Step 4: Understand the Duration and Limitations

The regime is available for 10 consecutive tax years—and it cannot be extended.

There are a few key limitations:

  • If you move to a non-qualifying municipality, you forfeit the benefit

  • If you revoke the regime, you cannot re-enter

  • If you fail to comply with the filing requirements, the regime is terminated

Like any favourable tax arrangement, it rewards careful planning and consistency.

Step 5: Know the Benefits—and What Still Applies

This is where the regime truly stands out:

  • Flat 7% tax on all qualifying foreign income, including pensions, overseas rental income, and investment returns

  • No Italian wealth tax (IVIE or IVAFE) on foreign assets or property

  • Italian-sourced income remains subject to ordinary income tax rates (IRPEF)

  • Inheritance and gift tax rules remain unchanged—cross-border estate planning remains essential

Planning to Relocate in 2026? You May Still Qualify

If you're still UK-resident but considering a move to Italy in the near future, it’s not too late. Here's the optimal path if you're targeting a 2026 relocation:

  1. Avoid triggering Italian tax residency in 2025

  2. Move to a qualifying town during 2026

  3. Register correctly and elect the 7% regime in your 2027 tax return, covering your 2026 income

In tax planning—just as in investing—timing matters.

Important Note

This guide is for informational purposes only and does not constitute personal tax or legal advice. The 7% regime is subject to change, and individual circumstances vary. Before relying on this opportunity, consult with a qualified cross-border tax adviser with expertise in both UK and Italian systems. We’re happy to connect you with a specialist. Plan your finances to maximise the opportunities before you move. We’re happy to advise you.

Final Thoughts

You’ve worked hard, saved diligently, and built up your pension. Now might be the time to enjoy the fruits of that effort—on your terms, in a setting that suits both your lifestyle and your financial goals.

Italy’s 7% flat tax regime offers a rare opportunity: less tax, more clarity, and a very pleasant backdrop for your next chapter.

With the right planning and professional guidance, you could enjoy la dolce vita.