People usually contact us to learn more about Italy's "flat tax" regime, a special system for richer people. However, there's a new Italian regime for foreign retirees that is also starting to attract some attention, due to how interesting it is.
What's the Italian tax regime for foreign retirees?
In 2019, Italy's Budget Law introduced a preferential tax regime similar to the Portuguese NHR, with the aim of attracting the foreign population to southern Italy. But, unlike the NHR, this regime is not targeted at digital nomads or entrepreneurs, but instead, at retirees living abroad.
This is how Italy is following the example of other countries such as Portugal and Greece by creating a preferential tax regime aimed at attracting upper-middle-income individuals to southern Italy, the area of the country with the least economic development.
How much taxes are paid under this tax regime?
According to the wording of the Italian tax regime for foreign retirees, all foreign-source income will be subject to a substitute tax of 7%, regardless of whether it's a pension income or income from investment portfolios (capital gains, dividends, or interests).
Therefore, the system is extremely simple: foreign retirees moving to southern Italy will only pay 7% of all their non-Italian income.
Nonetheless, since the new tax regime consists of a substitute tax, the taxpayer will not be entitled to any deduction for international double taxation. Alternatively, the taxpayer has the option to exclude income earned in certain countries from Italian taxation and subject it to ordinary taxation.
