So you want to live in Italy—eat pasta in the piazza, sip wine on the balcony, maybe complain about the Wi-Fi while a Vespa buzzes by. The only problem? Italy’s regular tax rates make you feel like they’re charging you for breathing Tuscan air—40% here, 32% there, social contributions stacked on top. Ouch.
But here’s the secret sauce Italy doesn’t exactly advertise: there’s a special tax regime that cuts your rate to just 7%. Yep, seven. And it’s not some shady loophole. It’s a real law created in 2019 to lure people (and their pensions) into Italy’s small towns.
The 7% Deal
Here’s how it works: if you move to one of the underpopulated towns in southern Italy or the islands (Calabria, Sicily, Molise, Basilicata, parts of Puglia and Sardinia), Italy rewards you by taxing your foreign income—pensions, Social Security, investment returns—at just 7% for up to ten years.
That’s right. No progressive brackets. No death-by-social-contributions. Just 7%.
What counts?
US Social Security
IRA or 401(k) distributions
Private pensions and annuities
Foreign dividends, rental income, or capital gains
Even crypto gains if the coins are sitting abroad
What doesn’t count?
Income you earn while working inside Italy (including remote work from your laptop in Calabria)
Rental income from Italian property
Local business profits
So if your money works harder than you do, Italy wants to give you a break.
The Catch (Because It’s Italy)
You have to actually live there. This isn’t a “buy a mailbox and fly in once a year” trick. You need residency, a house, utilities, the whole deal.
You must opt in during your first year of Italian tax residency. Miss that window, and you’re back in the regular brackets.
It’s not for digital nomads with active income—unless you restructure your finances carefully.
Who This Works For
This is perfect if you’re:
Retired or semi-retired with pensions or investments
An expat or dual national reconnecting with roots
A passive-income machine (dividends, royalties, rental abroad)
Someone who doesn’t need the chaos of Milan and is happy with a town where the bakery closes for lunch and means it
The Lifestyle Trade-Off
No, you can’t move to Florence or Rome and claim 7%. To qualify, your new hometown must have under 20,000 residents. That means crumbling stone walls, grandmas who insist you eat more, and sunsets that look like postcards. Some towns have fiber internet, others still think Wi-Fi is a type of wine—so choose carefully.
But if you’re okay with cobblestones, slower rhythms, and property prices that make your Florida condo look overpriced, this tax break could be your golden ticket to la dolce vita.
How to Get Started
Apply for a visa (usually the elective residency visa for retirees).
Move to a qualifying town and register as a resident.
Work with a commercialista (Italian tax advisor) to opt into the 7% regime in your first tax year.
File annually and pay your flat 7%.
Do that, and you’ll be legally living in Italy, paying less tax than most Europeans can dream of, and spending your afternoons deciding whether to order another espresso or another glass of wine.
Bottom Line
Italy’s 7% tax regime is one of the most underrated Plan B strategies out there. It’s legal, simple (by Italian standards), and comes with ten years of financial breathing room while you settle into your new life under the Tuscan, Calabrian, or Sicilian sun.
👉Want the step-by-step on how to claim the 7% deal without tripping over Italian bureaucracy? We’ve put together a simple guide with everything you need: which towns qualify, what paperwork to file, and how to avoid mistakes that cost you the benefit. Get your copy here →