Flat rate on all foreign-sourced income
For up to ten consecutive tax years. No income cap. No means testing. Qualifying municipalities under 20,000 population in southern Italian regions.
The Programme in One Paragraph
Article 24-ter of the Italian Consolidated Income Tax Code (TUIR) allows individuals who transfer their tax residence to certain qualifying municipalities in southern Italy to elect a substitute flat tax of 7% on all income produced abroad. The election is available for up to ten consecutive tax years. It covers all categories of foreign income — dividends, interest, capital gains, pension income, Social Security, rental income from foreign properties. There is no income cap and no means testing. Italian-sourced income is taxed at ordinary rates of up to 43% regardless of the election.
Who Qualifies
You must not have been an Italian tax resident for at least five of the nine tax years immediately preceding the year of election. For Americans who have spent their working lives in the United States, this condition is almost universally satisfied. You must also genuinely transfer your tax residence to a qualifying municipality — established primarily through anagrafe registration and spending 183+ days per calendar year in Italy.
Which Municipalities Qualify
Qualifying municipalities are comuni with a population under 20,000 in: Sicily, Sardinia, Campania, Basilicata, Abruzzo, Molise, Puglia, Calabria, and the province of Matera. Major cities are excluded — Palermo, Catania, Naples do not qualify. Your Italian tax advisor should confirm the qualifying status of your specific target municipality before you structure any purchase around this election.
What Income Is Covered
- US Social Security benefits
- Pension distributions (401(k), IRA, defined benefit plans)
- Investment income — dividends and interest from US brokerage accounts
- Capital gains from US securities or real estate sales
- Rental income from US or other non-Italian properties
- Business income sourced outside Italy
The US Tax Dimension
The United States taxes its citizens on worldwide income regardless of where they live. Moving to Italy and making the 7% election does not remove US tax obligations. The US-Italy tax treaty provides the Foreign Tax Credit mechanism to avoid double taxation, but the interaction requires specific modelling for your income profile. Americans with Italian accounts must file the FBAR (FinCEN 114) annually if aggregate foreign account balances exceed $10,000. FATCA reporting under Form 8938 may also apply. Engage both a qualified Italian commercialista and a US CPA with international expertise before making the election.
The Application Process
The election is made annually in your Italian tax return (Modello Redditi PF) for the year in which Italian residency is established. The election must be renewed each year and is not permanent. The maximum window is ten consecutive years — after which normal Italian rates apply. Revocation is permanent; you cannot re-elect after revoking. Budget €2,000–€4,000 per year for Italian tax compliance with a qualified commercialista.