British pensioners looking for sunnier skies, delicious food, a lower cost of living, and a lighter tax bill may find a warm welcome in southern Italy, thanks to a generous incentive designed to attract foreign pensioners. Italy is offering a 7% flat tax for foreign retirees who relocate to one of its quieter southern towns or villages. Under this scheme, eligible pensioners can enjoy significantly lower taxes on their overseas income for up to 10 years.
To qualify, pensioners must move to one of Italy’s smaller municipalities with fewer than 20,000 residents in the southern regions of Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise and Apulia. Since 2022, certain seismic areas in central Italy like Abruzzo, Marche, Umbria and Lazio are also eligible.
The scheme covers the towns of Camerino, Matelica, Tolentino, and Norcia too.
The 7% tax scheme was introduced by the Italian Budget Law in 2019 as a five year scheme but it has recently been extended to ten years.
The offer is open to both Italian and foreign nationals, as long as they haven’t been tax residents in Italy for the past five years and are receiving a foreign pension.
Under the scheme, foreign-source income, including pensions, is taxed at a flat rate of just 7%, thereby replacing Italy’s usual progressive tax system which can climb up to 43% for high incomes.
The aim of the scheme is to revitalise rural towns experiencing population decline by increasing residents and stimulating the local economy.
The flat tax must be paid annually in a single instalment, and covers most types of foreign income. However, the regime does not reduce taxes paid in other countries, and it’s important to understand how double taxation treaties may apply.
Originally, the flat tax was €100,000 (£87,000) per year but from 2025, new rules have increased this flat tax to €200,000 (about £174,000) per year for those who choose this option.
However, people who started paying the flat tax in 2024 can keep paying the lower amount of £87,000 until their tax deal ends.