Italy taxes your foreign pension at 7%. But only if you pick the right town.
Italy's Article 24-ter regime applies a flat 7% substitute tax to all your foreign-sourced income — Social Security, pensions, IRA distributions, dividends, capital gains, rental income from abroad — instead of standard IRPEF rates that reach 43%. For up to 10 years.
The geography is the catch: the regime is locked to qualifying municipalities in Italy's south and islands — towns under 30,000 people in Abruzzo, Molise, Campania, Puglia, Basilicata, Calabria, Sicily, and Sardinia. Pick Rome, Florence, or Milan and you're in standard brackets. Pick the right Puglian hill town and your entire tax bill drops to 7%.
Published
This page covers Italy's Article 24-ter flat tax regime in depth — the mechanics, eligibility, qualifying municipalities, worked examples, and 10-year planning horizon. If you're still deciding whether Italy is the right country for you, start with the Italy retirement guide, which covers the Elective Residence Visa, healthcare, Medicare, and the full cost picture alongside the tax overview.
Four things that determine whether this regime works for you
The rate
7% flat on all foreign-sourced income — pensions, Social Security, IRA distributions, dividends, capital gains, and rental income from outside Italy. This is a substitute tax that replaces IRPEF on your foreign income. You still pay standard IRPEF on any Italian-source income. Paid annually.
The geographic requirement
You must live in a qualifying municipality: a southern Italian town (Abruzzo, Molise, Campania, Puglia, Basilicata, Calabria, Sicily, or Sardinia) with a population under 30,000. Rome, Florence, Milan, Naples, and any city over 30,000 don't qualify. Where you live is the tax decision.
Who qualifies
You must not have been an Italian tax resident in any of the 5 years preceding your move. For most US retirees moving to Italy for the first time, this is a non-issue. You must also have foreign pension or equivalent income — US Social Security and 401(k) distributions are the cleanest qualifiers.
How long it lasts
Up to 10 consecutive tax years per person. The clock starts in the year you first elect the regime in your Italian tax return. After 10 years, you fall into Italy's standard progressive IRPEF rates — 23% to 43%. The 10-year limit is per individual, not per household.
How Italy's regime compares to Greece's 7% regime
Both Greece and Italy offer a 7% flat rate on foreign income, but with different trade-offs. Greece's Article 5B applies anywhere in the country for up to 15 years — Athens, Santorini, rural Crete, wherever you want to live. Italy's Article 24-ter is geographically locked to qualifying southern towns under 30,000 people, and runs for only 10 years. If the southern Italian lifestyle fits, Italy's regime can be just as powerful — but the town choice is non-negotiable.
Who qualifies for the Article 24-ter regime
The eligibility rules are set out in Article 24-ter of the TUIR (Testo Unico delle Imposte sui Redditi — Italy's consolidated income tax code, DPR 917/1986, as amended). Three conditions must be met simultaneously.
You receive foreign pension income
The regime is designed for retirees transferring tax residency to Italy with income from a foreign pension source. US Social Security benefits and US-employer pensions qualify directly. A 401(k) rolled into a traditional IRA and drawn as regular distributions also qualifies; keep documentation of the employment-contribution origin. Roth IRA income alone is a gray area — see the retirement accounts section below.
You were not an Italian tax resident in any of the previous 5 years
Unlike some regimes with a "5 of 6 years" lookback, Italy's rule is stricter: you must not have been an Italian tax resident in any of the 5 tax years preceding your move. For most US retirees relocating to Italy for the first time, this is a non-issue — you've never been an Italian tax resident. If you've previously lived in Italy and paid Italian taxes, confirm your exact lookback period with an Italian tax advisor before assuming you qualify.
You transfer your residence to a qualifying southern municipality
This is the condition that eliminates most of northern and central Italy. You must establish your actual residence — iscrizione anagrafica (registration in the municipal residents register) — in a qualifying town. The full criteria are covered in the next section. You must stay in a qualifying municipality for the regime to remain active; if you move to a non-qualifying city, the regime ends in the year you move.
The no-work restriction is separate from this regime
The Article 24-ter tax regime applies to foreign-source income regardless of whether you work in Italy. However, most US retirees move to Italy on the Elective Residence Visa, which separately bans employment and active business income in Italy. The no-work restriction comes from the visa, not the tax regime. If you hold a different visa category that permits work, the 24-ter regime can still apply to your foreign-source income, and any Italian-source earned income would be taxed at standard IRPEF rates.
Qualifying municipalities — the geographic requirement
Article 24-ter restricts the regime to municipalities in eight southern Italian regions plus certain earthquake-affected central towns, with a population cap. Law No. 34 of March 11, 2026 (effective April 7, 2026) raised that cap from 20,000 to 30,000 residents — adding 74 new eligible municipalities to the list.
The 8 qualifying regions (population ≤30,000 required)
Abruzzo
L'Aquila and surrounding area (earthquake-affected zone adds additional qualifying towns)
Molise
Italy's smallest mainland region; predominantly rural with many towns well under 30,000
Campania
Qualifying towns are those under 30,000 — Naples, Salerno, and Caserta themselves do not qualify
Puglia
Alberobello (~11,000), Locorotondo (~14,000), Cisternino (~12,000), Ostuni (~27,000)
Basilicata
Maratea (~5,000), Melfi (~17,000) — verify Matera (~60,000) as it exceeds the 30,000 threshold
Calabria
Tropea (~6,000), Pizzo (~9,000) — the toe of Italy's boot offers many small coastal towns
Sicily
Taormina (~10,000), Noto (~24,000), Scicli (~26,000) — Palermo, Catania, Messina do not qualify
Sardinia
Castelsardo (~6,000), Bosa (~8,000) — verify Alghero (~44,000) and Oristano (~31,000) as both may exceed the threshold
How to verify a specific town
Population figures shift with each census. The official qualifying list is maintained by Agenzia delle Entrate (Italy's tax authority) — not by any third-party guide including this one. Before committing to a location, confirm that your specific municipality is on the qualifying list at the time you establish residency. Your Italian commercialista (tax accountant) should verify this as part of your pre-move planning.
Agenzia delle Entrate → agenziaentrate.gov.itWhat the 2026 expansion actually changed
Before Law 34/2026, the population cap was 20,000. Towns like Ostuni (~27,000) in Puglia were ineligible. The expansion to 30,000 added 74 municipalities — mostly larger coastal and hill towns in Puglia, Sicily, and Calabria that are among the most appealing to international retirees. If you previously ruled out a specific town because it was just over the old 20,000 threshold, it's worth re-checking under the new rules.
Every type of foreign income — not just pensions
The 7% substitute tax applies to all foreign-sourced income once the regime is established — not just the pension income that made you eligible. That broad scope is one of the reasons the regime is particularly attractive to US retirees with multiple income streams.
US Social Security
Covered at 7% as foreign-source income. The US-Italy totalization agreement (in force since 1978 — the first US totalization agreement ever signed) prevents double Social Security taxation.
US pension & 401(k) distributions
Covered at 7%. A 401(k) is the cleanest qualifying source — it's tied directly to past US employment contributions, which is what Article 24-ter targets. A traditional IRA rolled over from a 401(k) also qualifies; keep documentation showing the employment-contribution origin.
Traditional IRA distributions
Covered at 7% as foreign-source pension income. Required Minimum Distributions (RMDs) are treated the same as voluntary distributions. If your IRA is a direct rollover from a 401(k), that origin strengthens the qualifying income argument.
Dividends & capital gains
All foreign-source investment income — US brokerage dividends, realized capital gains — falls under the 7% flat rate once the regime is in place. Income from Italian investments falls under standard IRPEF rates.
Foreign rental income
Rental income from a US property (or any property outside Italy) is foreign-sourced and covered at 7%. Rental income from an Italian property falls under standard IRPEF rates.
Roth IRA distributions
Once the regime is established on other qualifying income (SS or 401(k)), Roth distributions are covered at 7% as foreign-source income. Italy does not recognize the tax-free status of a Roth. See the Roth section for the eligibility nuance and the pre-residency planning lever.
What's NOT covered at 7%
- Italian-source income — rental income from Italian property, employment or consulting income from an Italian employer or client, or income from an Italian business falls under standard progressive IRPEF rates.
- No deductions against the substitute tax — you can't deduct expenses, contributions, or losses against the 7% substitute tax. You pay 7% on total foreign income, full stop.
- No foreign tax credits against the Italian substitute tax — you can't use foreign tax credits to reduce the 7% Italian substitute tax itself. The 7% paid to Italy may, however, be creditable against your US federal income tax via Form 1116 — see the US tax section below.
What the 7% regime actually costs — four scenarios
Four scenarios showing the Article 24-ter flat rate versus standard IRPEF brackets. Scenarios 1–3 cover the typical retiree range; Scenario 4 is the high-net-worth case. All figures are illustrative — exchange rates and individual circumstances vary.
Scenario 1 — Social Security only
$2,000/month SSStandard IRPEF on €22,100: 23%×€22,100 = €5,083. Plus regional + municipal surtax (~3% avg) = €663. Total ≈ €5,746.
Scenario 2 — Social Security + pension
$2,000 SS + $1,500 pension/monthStandard IRPEF on €38,640: 23%×€28,000 = €6,440; 33%×€10,640 = €3,511. IRPEF subtotal €9,951. Plus surtax (~3%) = €1,185. Total ≈ €11,136.
Scenario 3 — SS + IRA + investment income
$2k SS + $2k IRA + $500 divs/monthStandard IRPEF on €49,680: 23%×€28,000 = €6,440; 33%×€21,680 = €7,154. IRPEF subtotal €13,594. Plus surtax (~3%) = €1,490. Total ≈ €15,084.
Scenario 4 — High-net-worth retiree
$40k SS + $70k RMDs + $40k brokerage + $24k US rental/yrThe Form 1116 interaction
US citizens owe US federal income tax on worldwide income regardless of residence. At this income level, US federal tax is substantial before any credits. The ~€11,206 ($12,170) in Italian substitute tax paid can be applied as a Foreign Tax Credit (Form 1116) against your US federal liability on the same income streams. The credit is calculated per income basket (passive income — dividends, capital gains, rental — is a separate basket from general income like IRA distributions). The practical effect: the 7% Italian tax is largely absorbed into your US tax liability rather than stacking on top of it. Work with a cross-border CPA to model your specific FTC outcome.
Standard IRPEF on €160,080: 23%×€28,000 = €6,440; 33%×€22,000 = €7,260; 43%×€110,080 = €47,334. IRPEF subtotal €61,034. Plus regional + municipal surtax (~3%) = €4,802. Total ≈ €65,836.
These scenarios are illustrative only. Tax treatment depends on your full income picture, Italian residency status, correct election of the Article 24-ter regime, qualifying municipality status, and applicable US-Italy treaty provisions. EUR/USD exchange rates shift — recalculate using current rates. US federal income tax may apply separately depending on your income level. These figures do not constitute tax advice.
How to elect the regime — and when
Unlike Greece's Article 5B (which requires a separate election filed with AADE by March 31 each year), Italy's Article 24-ter election is made once — in your first Italian income tax return. After that, the regime continues automatically for up to 10 years unless you revoke it or lose eligibility. The substitute tax follows the standard Italian payment schedule.
Get your codice fiscale (Italian tax ID)
Before anything else · Day 1 in Italy
The codice fiscale is Italy's 16-character alphanumeric tax identification number. Without it you can't open a bank account, sign a lease, register residency, or file anything with Agenzia delle Entrate. Many ERV applicants receive theirs during consulate processing — if not, apply at any Agenzia delle Entrate office on arrival: same-day, free, with your passport. → Agenzia delle Entrate
Register residency in your qualifying municipality
Within about 20 days of arrival · Iscrizione anagrafica
Iscrizione anagrafica is the registration in your municipality's residents register. Go to the comune (town hall) of your address. They'll send a municipal officer (vigile) to verify you actually live there. This is the step that legally establishes your Italian tax residency — and confirms you're in a qualifying municipality. Without it, you can't elect the 24-ter regime or apply for an Italian health card.
Engage an Italian commercialista in your first year
Before your first Italian tax return
A licensed Italian commercialista (tax accountant) handles the election in your first Modello Redditi PF (personal income tax return). They'll verify your qualifying municipality status, confirm your income sources meet the Article 24-ter criteria, file the election, and manage the annual substitute tax payments going forward. Studio BCZ and Studio Legale Metta are two Italian firms with documented experience handling the 7% regime for foreign retirees. The election is a professional filing — not a self-service form — so get a qualified professional involved before your first return is due.
File the election in your first Italian tax return
First year of Italian tax residency · Modello Redditi PF
The election is made inside the Modello Redditi PF for the first year you are an Italian tax resident. After the election is accepted, the regime continues automatically for up to 10 years — you don't file a new election each year. The annual 7% substitute tax is paid on the standard Italian income tax schedule (typically two installments: a first payment by late June and the balance by late November). If you move out of your qualifying municipality to a non-qualifying city, the regime ends in the year of the move. You can also voluntarily revoke the regime, but that choice is permanent — you cannot re-elect it.
If you arrive mid-year
Italy determines tax residency by the 183-day rule — you're an Italian tax resident for a calendar year if you're registered in the anagrafe (residents register) or physically present for more than 183 days that year. Arriving in September means you may not be an Italian tax resident in the year of arrival. In that case, the first year of the regime typically applies to the first full calendar year in Italy. Your commercialista will confirm the right election year based on your exact arrival and registration date.
Traditional IRA, 401(k), RMDs, and the Roth question
The US-Italy tax convention was signed in 1999 and entered into force in 2010. The Roth IRA was created in 1997 — the treaty's negotiators didn't design it to address Roth-specific treatment, and Agenzia delle Entrate has not published formal guidance on how Roth distributions interact with Article 24-ter. That gap creates real planning uncertainty for Roth holders.
Traditional IRA / 401(k) — clean treatment
Under Article 24-ter, traditional IRA and 401(k) distributions are covered at 7% as foreign-source pension income. The 401(k) is the cleanest qualifier — directly tied to past US employment contributions. A traditional IRA originally funded from a 401(k) rollover also qualifies; document the rollover origin. Required Minimum Distributions (RMDs) are treated the same as voluntary distributions — you cannot defer RMDs by living abroad, and they are covered at 7% once the regime is active.
Without the regime (standard IRPEF): taxable at 23%–43% plus regional/municipal surtaxes. The US Foreign Tax Credit (Form 1116) may offset some or all US federal tax owed on the same income.
Roth IRA / Roth 401(k) — Italy does not recognize the tax-free status
Italy doesn't have an equivalent of the Roth IRA and does not honor its tax-free treatment at distribution. Roth distributions are taxed as foreign-source income — at 7% under the regime or at standard IRPEF rates if you're not enrolled. Some practitioners argue that after-tax contribution basis can be excluded with proper documentation, but Italy's recognition of this is not automatic.
There's an eligibility nuance: a standalone Roth IRA may not on its own qualify you for the Article 24-ter regime. Italian tax doctrine treats the Roth as a savings scheme rather than a pension. If your only retirement income is a Roth, confirm with a licensed Italian commercialista that you can still elect the regime before relying on it.
Once the regime is established on qualifying income (Social Security, traditional IRA/401(k)), all foreign-source income — including Roth distributions — falls under the 7% rate automatically.
The planning lever: convert before you become an Italian tax resident
Pre-residency Roth conversions — completed in the calendar year before you establish Italian tax residency — are taxed under US law only. Those converted funds are then after-tax basis from a US perspective. Under the general principle that amounts already taxed before residency began should not be taxed again on distribution, a strong argument exists that pre-residency conversion amounts are not subject to Italian tax when distributed.
The window closes the day your anagrafe registration takes effect. If you have a substantial traditional IRA and are planning a move within the next 1–2 years, this conversion question is worth a dedicated session with a cross-border CPA now — well before arrival.
You still file US taxes — here's how the two systems interact
Moving to Italy doesn't end your US tax filing obligation. The US taxes citizens on worldwide income regardless of residence. How the Italian 7% substitute tax and your US return interact depends on what type of income you're drawing.
Social Security — treaty-protected but not treaty-exempt for US citizens
Under Article 18(2) of the US-Italy tax treaty, US Social Security paid to a resident of Italy is taxable only by the United States. In practice, however, the treaty's "savings clause" preserves the US's right to tax its own citizens regardless. For most SS-only retirees, US federal tax on Social Security at moderate income levels is zero or minimal (below $25,000 single-filer threshold). The 7% Italian substitute tax is the primary tax on that income.
Pension and IRA income subject to both US and Italian tax
If your pension or IRA distributions trigger US federal income tax, you can claim the Foreign Tax Credit (Form 1116) to offset your US liability with the Italian substitute tax paid. The credit is applied per income basket — passive income (dividends, capital gains, foreign rentals) in one basket; general income (pensions, IRA distributions) in another. The credit can't exceed your US tax owed on the same income type, but in most cases the 7% Italian tax is largely absorbed into your US liability rather than stacking on top of it.
TFX has documented experience handling Article 24-ter elections alongside Form 1116 foreign tax credits for US-Italy returns.
FBAR and FATCA
If your Italian bank accounts exceed $10,000 in aggregate at any point during the year, you must file an FBAR (FinCEN 114) by April 15 (automatic extension to October 15). FATCA (Form 8938) has higher thresholds but may also apply depending on total foreign asset levels. Your expat CPA handles these alongside your regular US return — they are separate from the Italian substitute tax.
Don't use a domestic CPA for this
A domestic US CPA who doesn't specialize in expat returns often doesn't know how Article 24-ter interacts with US treaty provisions, may miss the FBAR, and may not know how to properly handle Form 1116 alongside the Italian substitute tax. For a return involving Italian residency, the 24-ter election, US foreign tax credits, and RMDs, you need someone who does this every day. See the CPA recommendation below.
The 10-year clock — and what comes after
Article 24-ter has a maximum duration of 10 consecutive tax years per person. Year 1 is the first year you elect it. Year 10 is the last year the flat rate applies. After that, you're taxed under standard Italian IRPEF rates on foreign income.
What the 10-year limit means in practice
If you elect the regime starting in 2027, it applies through 2036 — 10 years. From 2037 onward, your foreign income is taxed at standard progressive IRPEF: 23% on the first €28,000, 33% on €28,001–€50,000, 43% above €50,000, plus regional and municipal surtaxes. The 10-year limit is per individual, not per household.
Spouses have separate clocks
The 10-year limit is per individual. If you and your spouse both elect the regime in the same year, your clocks run in parallel and expire together. If one spouse establishes Italian residency a year or two later, their 10-year clock starts later and extends further — a meaningful planning consideration for couples with staggered moves.
What are the options after 10 years?
After 10 years, standard IRPEF rates apply to your foreign income. The planning options at that point depend on your situation:
- Stay and pay standard rates — if your foreign income is modest, Italy's cost of living and quality of life may still make the math work even at standard rates. The SSN healthcare system and the community you've built have real value.
- Evaluate Greece's Article 5B — Greece's pensioner regime runs for 15 years and has no geographic restriction. If favorable tax treatment remains a priority after your Italian 10 years, Greece is the natural comparison at that point.
- Use the Foreign Tax Credit more aggressively — under standard IRPEF, the Italian tax paid may be creditable against a larger share of your US federal tax liability via Form 1116.
If you elect at 65, the window runs to 75. Year 10 feels abstract from year 1 — but the 10-year cliff is shorter than Greece's 15, so keep it in your long-range planning even if it's not urgent on day one.
What if I move from a qualifying town to a non-qualifying city?
The regime ends in the year you establish residency in a non-qualifying municipality. It's not a penalty — you simply revert to standard IRPEF on foreign income from that year forward. If you later move back to a qualifying town, you cannot re-elect the regime for the remaining years of what would have been your original 10-year window. The unused years are lost.
This is the strongest practical argument for choosing your base carefully before you move — town selection isn't just about lifestyle, it's a tax commitment.
What if Italy changes or eliminates the regime?
Article 24-ter was introduced by Law 232/2016 and has been amended several times — most recently by Law 34/2026, which expanded the qualifying towns. The regime has been politically stable and has consistently moved in the direction of expansion, not elimination. That said, no statutory tax benefit is guaranteed indefinitely.
A future change would typically grandfather existing participants through their remaining years — that has been the pattern with similar European special regimes, though it is not legally guaranteed. Ask your commercialista about current status each year when you file.
Article 24-ter — frequently asked
Can I live in a qualifying town part-time and keep a US address?
Does the regime cover income I earn from Italian clients or consulting work?
If my qualifying town's population grows above 30,000 after I move in, do I lose the regime?
Can my spouse and I both elect the regime at the same time?
What happens to the regime if I spend more than 6 months outside Italy?
How to move this forward
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Confirm your qualifying town before you sign a lease
The single most important pre-move step is verifying that your chosen municipality is on the Article 24-ter qualifying list — not just in one of the eight regions, but specifically under 30,000 population and on Agenzia delle Entrate's current list. Your commercialista can verify this; so can the comune directly. Don't commit to a rental agreement before this is confirmed.
Agenzia delle Entrate → → (opens in new tab) -
Run your income picture past a cross-border CPA
Before moving to Italy, run your specific income mix — SS, IRA/401(k), brokerage accounts, rental income, Roth balances — past a specialist who handles both US and Italian returns. The regime's interaction with Form 1116, the Roth gray area, and whether pre-residency conversions make sense for your situation are all worth a dedicated planning session. First consult at TFX is free.
Book a free consult with TFX → (opens in new tab) -
Get your codice fiscale in your first week
The codice fiscale is the prerequisite for every other step in Italy — the permesso di soggiorno application, bank account, residency registration, and the Article 24-ter election. Many retirees receive it during consulate processing. If not, any Agenzia delle Entrate office issues it same-day with your passport.
Full Elective Residence Visa guide → -
Register in the anagrafe and engage a commercialista in your first months
Iscrizione anagrafica (registration in the municipal residents register) establishes your Italian tax residency and confirms you're in a qualifying municipality. Do this within roughly 20 days of arrival. Then find a licensed Italian commercialista before your first Italian tax return is due — they'll file the Article 24-ter election and handle your annual substitute tax payments for the full 10-year window.
Sources
- Italy Individual Income Tax — PwC Tax Summaries: Article 24-ter regime overview, IRPEF brackets (23%/33%/43%), 2026 Budget Law middle-bracket reduction to 33%, and regional/municipal surtax ranges. Updated 2026.
- Personal Income Tax Rates and Calculation — Agenzia delle Entrate: Official Italian tax authority confirmation of IRPEF brackets and Article 24-ter substitute tax structure.
- Italy Flat Tax 7% for Foreign Pensioners — Studio BCZ: Law No. 34 of March 11, 2026 (effective April 7, 2026); 74 newly eligible municipalities; population threshold expansion from 20,000 to 30,000.
- Italy's 7% Flat Tax Regime 2026 Guide — Idealista: Article 24-ter overview, eligibility requirements, qualifying southern regions, and 2026 expansion summary.
- Italy 7% Flat Tax — Studio Legale Metta: Roth IRA classification under Article 24-ter, savings-vs-pension distinction, pre-residency conversion planning rationale.
- Retire in Italy: 7% Flat Tax for US Citizens — Cerity Partners: Cross-border planning context for US retirees electing the 7% regime; Form 1116 interaction and FTC basket mechanics.
- US-Italy Tax Treaty — Taxes for Expats: General Roth and IRA treatment under the treaty; FTC mechanics for Italian substitute tax paid against US federal liability.
- Expat Roth Conversions Q&A — Creative Planning International: Pre-residency Roth conversion strategy for Italy-bound retirees; rationale for why pre-residency conversions may avoid Italian taxation at distribution.
- Totalization Agreement with Italy — SSA.gov: US-Italy totalization agreement signed May 23, 1973; effective November 1, 1978 (the first US totalization agreement ever signed). No double Social Security taxation.
- Italy Tax Treaty Documents — IRS.gov: US-Italy income tax convention signed August 25, 1999, in force January 1, 2010; Article 18(2) on Social Security taxability.
- IRPEF 2026 Tax Cut — Graber & Partner: 2026 Budget Law reduction of the middle IRPEF bracket from 35% to 33%.
Need someone who handles both US and Italian returns?
TFX specializes in expat returns — Form 1116 foreign tax credits, Article 24-ter regime documentation, FBAR filing, and US-Italy treaty analysis. First consult is free.
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