Pensioners: the 7% regime and a pension from abroad

The 7% regime, concretely

It is set out in article 24-ter of the income tax code. Anyone who opts in pays a 7% substitute tax on all foreign-source income — not just the pension: rents, dividends, interest and capital gains earned outside Italy as well.

Italian-source income is still taxed normally under IRPEF.

The requirements

Requirement	What it means
Foreign pension	You must receive pension income paid by a foreign payer
Not resident before	You must not have been tax resident in Italy in the five previous tax years
Country you come from	You must move from a country with which Italy has administrative cooperation agreements on tax. That covers every EU country and many non-EU ones: check yours before you move
Where you move to	A municipality with no more than 30,000 inhabitants in Abruzzo, Basilicata, Calabria, Campania, Molise, Puglia, Sardinia or Sicily; or a municipality of up to 3,000 inhabitants in the areas hit by the 2016 and 2017 earthquakes

You opt in on the tax return for your first year of residence in Italy, and the choice covers that year and the nine that follow: ten years in all.

The side benefits that matter

Besides the rate, the regime brings two heavy simplifications:

• no IVIE or IVAFE on the foreign property and financial assets covered by the option;
• no RW form for those same assets.

For anyone who still has a home and savings in their country of origin, this part is often worth as much as the rate.

When it lapses

• If the requirements stop being met, for example by moving to a municipality that does not qualify.
• If the tax is not paid when due.
• By voluntary withdrawal.

Lapsing puts everything back under ordinary taxation, with the reporting obligations that come with it.

If the regime is not for you: ordinary taxation

That is not a failure. A foreign pension taxable in Italy goes into total income and is taxed under progressive IRPEF, with the pension income deduction and the credit for tax paid abroad, which the special regime does not have.

For average pensions, once local surcharges and deductions are counted, the gap with 7% is less dramatic than it looks — and there is no risk of double taxation.

You paid contributions in more than one country

Someone who has worked in several countries does not receive one combined pension: they receive one per country, each calculated on the years paid in there. The real question is whether years paid elsewhere count towards each country's minimum contribution period. That depends on where you worked.

Where you worked	Do the periods add up?
EU, EEA countries and Switzerland	Yes, under EU regulation 883/2004. Each country pays its share
Non-EU countries with a treaty with Italy — for example the United States, Canada, Australia, Argentina, Brazil	Yes, within the limits of the treaty, which varies from country to country
Non-EU countries with no treaty	No. Each country applies its own requirements alone: years that fall short elsewhere cannot be recovered

An example: twenty-five years in an EU country and five in Italy do not produce an Italian pension worth thirty years, but they take you over the Italian threshold so you collect the share for those five. The same five years, with no agreement with the country where you worked the rest, may give you nothing.

One application, where there is an agreement

Within the EU you do not file twice. You file one application in the country where you live, if you worked there, and that institution forwards it to the other countries involved. If you never worked in your country of residence, you file in the country where you worked last. With non-EU treaties, the procedure depends on the agreement.

In Italy a patronato handles international claims free of charge, both EU and treaty ones: for anyone unfamiliar with INPS it is the simplest route.

Not all of your pension follows you

Many countries pay part of a pension only to people living on their territory: top-ups to a minimum, social pensions, housing allowances. A pension earned through work can usually be collected abroad; these benefits often cannot. Ask your pension institution which components you lose by moving, and do it before you go.

Two things you cannot skip

Tell your pension institution you are moving. Many institutions require you to report stays abroad beyond a certain length, and if you keep collecting benefits you are no longer entitled to, they will ask for them back.

Answer the proof-of-life request. Anyone receiving a pension while living abroad must periodically prove they are alive, usually once a year. If the certificate does not arrive, payments stop. It can be done in several ways, often through a bank or consulate.

Getting your pension paid in Italy

• A foreign pension can be paid into an Italian account: you notify the payer of your new residence and bank details.
• Some non-EU payers only pay into accounts in their own country, or charge high exchange fees: check in advance how the transfer will arrive.
• If you also have Italian contributions, your contact is INPS, and a patronato handles the claim free of charge.

Healthcare: it depends on who pays your pension

If your pension is paid by an EU or EEA country, Switzerland or the United Kingdom, ask the institution that pays it for the S1 form, hand it to the ASL, and you are registered with the National Health Service: full care in Italy, with the cost borne by the country paying the pension. It is free. Ask for it before you move.

If your pension is paid by a non-EU country, there is no S1. You can register with the National Health Service voluntarily, paying an annual contribution of at least €2,000, or rely on private health insurance. If you arrive on an elective-residence visa, you need the insurance to get the visa in the first place. Details are in the guide on healthcare.

Choosing the municipality

If you are aiming at the 7% regime, choosing where to live is not just about looks:

• check the official population on ISTAT data: the 30,000 threshold is measured on those figures, and a growing municipality can cross it;
• look at the services you will actually use: distance to a hospital with an emergency department, a family doctor, connections to an airport;
• bear in mind that the regional and municipal surcharge does not apply to income covered by the regime, but does apply to Italian income;
• remember that residence must be real: the local police check it, and the tax office looks at substance.

Common mistakes

• Choosing the municipality before checking the treaty. Wrong order: first find out who taxes the pension, then choose where to live.
• Assuming a tax credit. Under the special regime there is none.
• Counting on contribution years that do not add up. Outside the EU and with no treaty, years worked in another country do not help you reach the Italian minimum.
• Not asking for the S1 form, if you are entitled to it, and ending up paying an avoidable voluntary health contribution.
• Discovering after the move that part of the pension is paid only to residents.
• Moving residence at the end of the year without working out the effect on the 183 days and on the first year of the option.
• Not updating your address with the pension institution, and having payments suspended over a certificate that never arrived.