Italy’s 7% flat tax regime for foreign retirees became more practical in April 2026 after a legal change expanded the size of eligible towns. The regime can apply a flat 7% tax to foreign income for up to ten years, but only for qualifying taxpayers who move tax residence to eligible municipalities in southern Italy.
What changed in April 2026
Italy’s 7% flat tax regime for foreign retirees is governed by Article 24-ter of the tax code.
Before the 2026 change, eligible towns generally had to have fewer than 20,000 inhabitants. Law 34/2026, article 26, raised that population ceiling to 30,000.
The change applies across the eight southern regions covered by the regime:
- Sicily
- Calabria
- Sardinia
- Campania
- Basilicata
- Abruzzo
- Molise
- Puglia
The higher population limit brings larger and better-connected towns into scope. The practical effect is that some towns with stronger services, transport links, and daily-life infrastructure may now qualify.
The reform was not mainly about small, famous coastal villages such as Positano, Ravello, and Amalfi, which were already under the previous 20,000-person limit. The more significant change is for mid-sized towns such as Ostuni in Puglia, which only became eligible after the April 2026 update.
Cefalù in Sicily, with roughly 14,000 residents, is an example of a town that was already eligible before the change.
The tax benefit is broader than pensions
The regime is often described as a pensioners’ flat tax, but the pension is mainly the entry point. The 7% rate can apply to foreign income more broadly, including:
- Foreign pensions
- Dividends
- Capital gains
- Rental income from property abroad
- Interest
- Royalties
- Proceeds from winding up a foreign company, confirmed by Agenzia delle Entrate ruling 292/2025
The regime is therefore most relevant for retirees who have a qualifying foreign pension and a meaningful base of foreign assets. The benefit is larger where the difference between the 7% Italian rate and the taxpayer’s home-country marginal rate is substantial.
Main eligibility conditions
Two core conditions apply alongside the income requirements:
- The applicant must not have been an Italian tax resident in the previous five years.
- The applicant must relocate from a country that has an administrative-cooperation arrangement with Italy on tax matters.
The cooperation requirement covers all EU states, countries with a double-taxation treaty or information-exchange agreement with Italy, and signatories to the OECD multilateral convention. In practice, the article says this mainly excludes non-cooperative tax havens.
Tax status and residence rights are separate
The 7% regime is a tax measure. It does not by itself give a person the right to live in Italy.
EU citizens already have the right to reside in Italy, but still need to make the separate tax election if they want to use the regime.
Non-EU retirees who want to live in Italy beyond a tourist stay need a residence permit. The article identifies the Elective Residency Visa as the most common route for retirees with stable passive income.
The 7% tax rate does not depend on holding one specific residence permit. A retiree may qualify through an Elective Residency Visa or through the Italy Investor Visa, provided the tax regime’s underlying conditions are met.
One important caveat is that the election is not reversible. Once the taxpayer revokes or forfeits it, they cannot elect it again.
Lifestyle still matters
The tax calculation is only one part of the decision. The regime applies in smaller southern towns, so practical questions matter:
- Access to healthcare
- Transport links
- Daily services
- The pace of life in a smaller town
- Whether the location fits the retiree’s priorities beyond tax savings
The 2026 reform makes the regime more practical by expanding the list of eligible towns, but it does not remove the trade-offs of relocating to southern Italy.
Population limits can create timing risk
There is no artificial deadline in the regime, but the population ceiling creates a practical risk for popular towns.
Ostuni, in Puglia, became eligible in April 2026 after the ceiling rose to 30,000. Its most recent official population count was 29,764, according to ISTAT data from January 2025.
That leaves a margin of 236 people below the 30,000 limit.
The article argues that the most desirable towns may be the first to lose eligibility if their populations rise above the threshold. For applicants focused on specific towns close to the population ceiling, the relevant risk is not a formal deadline but the arithmetic of the population cap.
Source article: www.globalcitizensolutions.com
