The Sostegni Ter (Dl 4/2022) has changed the rules of the flat tax for new resident retirees. Let's see how.

Italian law recognizes the opportunity to enjoy a privileged tax regime for all those who receive foreign pensions (because they are paid by a public or private entity of a foreign country) and who wish to transfer their tax residence to Italy, in one of the municipalities with a population not exceeding 20,000 inhabitants, provided they belong to the territory of one of the following regions:

  • Island of Sicily;
  • Calabria;
  • Island of Sardinia;
  • Campania;
  • Basilicata;
  • Abruzzo;
  • Molise;
  • Puglia;

Foreign retirees will be able to enjoy an optional tax regime, characterized by the application of a flat tax at a 7 per cent, regardless of the type of income generated abroad and for each of the nine tax periods during which the option is valid.

The above also applies to those who decide to transfer their tax residence to one of the Italian municipalities affected by serious seismic events, such as L'Aquila, or even smaller municipalities, such as Camerino, Matelica, Tolentino, and Norcia.

To assist in identifying the municipality where one can settle, there is the "Annual municipal survey of population movement and calculation," which is published on the Istat website on January 1st of the year preceding the first period of validity of the option.

Italian flat tax for new residents retirees 7%: Flat tax requirements

The operational procedures of the flat tax for new resident foreign retirees, including the methods of exercise, revocation of the option, cessation of effects, payment methods of the substitute tax, and the information source for identifying municipalities meeting the criteria established by the regulations, are outlined in measure No. 167878 of May 31, 2019, issued by the Revenue Agency.

More specifically, the flat tax is formalized with the submission of the income tax return, referring to the tax period in which the interested parties have actually transferred their tax residence to one of the eligible municipalities, and it is effective from the same tax period onwards.

Specifically, the taxpayer is required to report in the income tax return the 5 requirements that allow them to benefit from the favorable tax regime, namely:

  • Non-resident status in Italy for a period of at least 5 tax periods prior to the start of the option's validity;
  • The jurisdiction where the last tax residence was held;
  • The foreign states or territories for which the option not to apply the substitute tax will be exercised;
  • The residence country of the foreign entity providing the income;
  • The amount of foreign source income subject to the substitute tax.

The favorable effects cease after the expiration of 5 years following the tax period in which the option was exercised.

In any case, the taxpayer is free to revoke the choice made in one of the subsequent tax periods to the one in which it was exercised, directly in the income tax return.

The loss of eligibility for this regime may occur in the event of:

  • Failure to meet the requirements;
  • Omission or partial payment of the substitute tax by the due date for the payment of the final income tax;
  • Transfer to a municipality not mentioned or abroad;
  • The emergence, as a result of a check, of the existence of tax residence in Italy in the 5 years preceding its exercise.

Loss of eligibility precludes the exercise of a new option.

Italian flat tax for new residents retirees and INPS pensions: clarifications from the Italian Revenue Agency

Due to the foregoing, one might wonder if the 7% flat tax applies to all retirees, regardless of nationality, who receive a foreign pension. This also applies to those receiving an INPS pension.

The answer is yes, as clarified by the Italian Revenue Agency in response to inquiry no. 280/2020.

In other words, receiving income from an Italian pension does not preclude, provided the above-described requirements are met, applying the taxation regime under consideration to retirees who relocate to Italy with a foreign pension.

Italian flat tax for new residents retirees: How can we help you?

The Arnone&Sicomo is an International law firm, with a specialized department in pension law.

Our securities lawyers are supported by international tax consultants to ensure clients receive the highest level of assistance, not only legally.

We are aware of the difficulties foreign retirees face when they wish to move to a Southern Italian country and the complex bureaucracy they have to deal with. And it is here that the team of specialized lawyers and consultants at the Arnone&Sicomo law firm intervenes, in order to facilitate the move to our beautiful Country.

Our law firm also has a real estate department, capable of handling the entire process of purchasing property in Southern Italy.

Our headquarters are in Palermo, the capital of the beautiful "island of Sicily".

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.