Since 2019, Italy has offered a special seven percent tax rate to those who retire in certain peaceful, sunny, and usually very affordable parts of the country with a foreign pension.
Understandably, this offer has generated a lot of interest from people around the world who are considering a move to Italy for their retirement.
Q&A: What to know about Italy’s flat tax rate for pensioners
While it may sound like the low tax rate would be immensely popular, the scheme has quite a few requirements which mean many would-be applicants find it's not the right fit for them.
Firstly, you must settle in a qualifying town or municipality with fewer than 20,000 inhabitants. Almost all of these are in the southern regions of Abruzzo, Basilicata. Calabria, Campania, Molise, Puglia, Sardinia, or Sicily.
You must receive a foreign-sourced pension, and you can’t have been a legal resident of Italy at any time in the previous five years.
If you meet all the requirements, you'll need to be able to prove it when filing your first Italian tax return in order to benefit from the low tax rate.
The scheme is now in its fifth year, but the latest data reveals that fewer than 500 people in Italy are taking advantage of the seven-percent tax rate.
READ ALSO: Retirement in Italy: What you need to know about visas and residency
A total of 474 people declared a foreign pension income under the scheme according to figures from the Department of Finance, published at the end of April, on tax returns filed in 2023.
They declared a total pension income amount of 19 million euros, which works out at 40,210 euros per person on average, according to financial newspaper Il Sole 24 Ore, and a total income from all foreign sources of 28.7 million euros.
This resulted in just under two million euros in tax paid to the Italian state, according to the data.
The flat tax represents a substantial saving, as Italy's usual Irpef (income tax) rates are between 23 and 43 percent depending on income bracket.
If you're interested in using the scheme yourself, you can read more about the requirements in a separate article here.
Please note that The Local is unable to advise on individual cases. Find more information about Italy's flat tax rate for retirees on the Italian revenue agency (Agenzie delle Entrate) website here (in Italian only) or speak to a qualified tax advisor.
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