Italy Taxes Some Expats 7% And Others 43%
The same country can be your best and worst decision at the same time
Italy charges some expats 7% on their income, while others pay 43%.
Three separate tax regimes exist in Italy, each designed for a different type of person.
Chose the right one, and Italy becomes one of the most tax-friendly places in Europe.
Chose the wrong one (or stumble into it by accident), and you’re handing nearly half your income to the government.
Asking: “Is Italy good for expats?” is the wrong question.
The right one is simpler:
What are you trying to accomplish?
Today we’re covering:
The 7% flat tax for pensioners (and the catch nobody mentions)
The €300k flat tax for high earners (which just changed in December 2025)
Why people end up at 43% without realizing it
Let’s get into it.
Disclaimer: I'm not a tax advisor. I'm a guy who's spent years figuring these things out the hard way. This is educational, not personal/tax advice.
The 7% Regime (Pensioners In The South)
Italy wants retirees.
Specifically, it wants retirees willing to live in small towns that need an economic boost.
In 2019, the government introduced a 7% flat tax for people with foreign retirement income.
The goal was straightforward:
Reverse population decline by attracting retirees with money to spend.
How it works:
You move to Italy, settle in an eligible municipality, and pay just 7% on your foreign retirement income for up to ten years.
But there’s a catch (actually, three of them):
The requirements:
You need foreign retirement income to qualify.
If you’re American, this includes Social Security, 401(k) distributions, IRA payouts, and traditional employer pensions. Italy groups all of this under “pension income” (broader than how Americans use the word).
You must move to a “qualifying municipality”.
This means towns under 20,000 people in either Southern Italy (Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise, Puglia) or Central Italy’s earthquake-affected zones (parts of Umbria, Marche, and Lazio). Rome doesn’t qualify (neither does Milan or Florence).
You can’t have been an Italian tax resident in the previous five years.
If you’ve been living in Italy already, you can’t use this regime.
Once you qualify, the 7% rate applies to all your foreign income.
Not just your pension.
Dividends from your U.S. brokerage account: 7%.
Rental income from that property you kept back home: 7%.
Interest and capital gains: 7%.
Let’s say you’re a 62-year-old American with an $80,000 pension and another $40,000 in dividends and rental income.
Under this regime, your Italian tax bill on $120,000 would be $8,400.
Move to Rome or Florence instead, where you would pay Italy’s regular progressive rates (23% to 43%, plus regional taxes), and that bill jumps to anything between $42k to $45k (depending on regional + municipal surcharge).
Takeaway: The 7% regime is more powerful than most people realize, but it comes with geographic restrictions. If you’re wondering whether you qualify and need help to find the right visa, DM me “Italy” and I’ll help you figure out your next step.
Stuck on your moving abroad process? You can book 1 hour with me here.
The €300k Flat Tax (High Net Worth)
Italy also wants rich people (just not as badly as it used to).
In 2017, the government introduced a flat tax for high net worth individuals moving to Italy.
The idea was:
Pay a fixed amount each year, and Italy doesn’t touch your foreign income.
When it launched, that number was €100,000 per year. In August 2024, it doubled to €200,000.
Then on January 1, 2026, it jumped again to €300,000.
How it works:
You move to Italy, become a tax resident, and pay €300,000 annually.
In exchange, all your foreign income is covered.
Dividends from your U.S. portfolio: Covered.
Rental income from properties in three countries: Covered.
Capital gains from selling shares in a foreign company: Covered (with one exception).
Any income (also rental) earned inside Italy is still taxed at normal rates, while capital gains from selling more than 20% voting rights in a private company within the first five years is also not included in this regime.
The requirements:
You must not have been an Italian tax resident for at least 9 of the previous 10 years.
This is stricter than the 7% pensioner regime, which only requires 5 years.
Let’s do the math.
Say you sold your business a few years ago and now earn €1 million annually from foreign investments.
Under Italy’s normal progressive system (23% to 43%, plus regional and municipal taxes), you would owe roughly €440,000.
Under the flat tax regime, you owe €300,000.
This means you need foreign income above €700,000 (approx.) before this regime even breaks even.
At €500,000 in income, you would pay around €210,000 under “normal rates”. The €300,000 flat tax would cost you more.
Takeaway: The €300,000 flat tax is a good deal, but only if you’re already very wealthy with foreign income above ≈€700,000.
The 43% Reality (The Passport Trap)
An EU passport is the dream.
Ask anyone in the expat world what they want, and EU citizenship ranks near the top.
The food, the culture, the access to 27 countries.
But holding a passport AND living in Italy also has downsides.
Or to put it in other words:
“With great passport comes great responsibility.”
People going after Italian citizenship aren’t thinking about taxes (at least at first).
They’re thinking about the freedom an EU passport get them.
And that’s fine, as long as you understand what you’re signing up for when you decide to live there full-time.
Italy’s standard tax system is brutal.
Income above €50,000 gets taxed at 43%.
Add regional taxes (1.23% to 3.33%) and municipal taxes (up to 0.9%), and your effective rate can hit 47%.
On worldwide income.
That means your U.S. dividends, your rental income back home, your retirement accounts.
All of it.
This one is very important:
Italy has four tests for tax residency.
Meet any one of them for more than 183 days in a calendar year, and you’re an Italian tax resident:
Physical presence
Spend more than 183 days on Italian soil. Arrival and departure days both count as full days. The days don’t need to be consecutive.
Registration in the “Anagrafe”
This is the municipal registry. If you’re registered for more than 183 days, you’re presumed to be a tax resident (though you can try to prove otherwise).
Domicile
Italy defines this as where your personal and family relationships are centered. If your spouse and kids live in Milan while you travel for work, Italy might claim you as a tax resident even if you’re physically there less than half the year.
Habitual abode
Your main place of living, even if you’re not formally registered there.
Or to quote the “Agenzia delle Entrate” (Italian version of the IRS):
"For income tax purposes, persons who for the greater part of the tax period, including fractions of a day, have their residence within the meaning of the Civil Code or domicile in the territory of the state or are present there are considered residents. Unless proven otherwise, persons registered for most of the tax period in the resident population registers are also presumed to be resident."
So who ends up paying 43%?
People who get citizenship and then move to Italy without tax planning
Retirees who don’t qualify for the 7% regime because they want to live in Florence or Rome
Remote workers who overstay without realizing the tax consequences
Anyone who assumes citizenship and residency are the same thing
That last one is crucial.
Citizenship is a passport.
Tax residency is a status triggered by where you live.
You can have Italian citizenship and never be an Italian tax resident.
You can also become an Italian tax resident without being a citizen.
Getting Italian citizenship doesn’t automatically make you a tax resident.
Moving to Italy and meeting one of the four tests does.
Takeaway: The Italian passport is valuable. But moving to Italy full-time without a tax strategy means paying 43% or more on your worldwide income. Neither is “wrong”, just know what you’re getting into.
Conclusion
That’s it.
Three tax regimes, one country, completely different outcomes:
The 7% flat tax turns Italy into one of the most tax-friendly places in Europe, but you need retirement income and you’re living in a small southern town.
The €300k flat tax works for the ultra-wealthy with €700k+ in foreign income. For everyone else, not so much.
The 43% standard rate is what people end up paying if they move to Italy without a plan.
The question was never:
“Is Italy good for expats?”
The question is:
“What are you trying to accomplish, and which “version” of Italy helps you get there?”
Thanks for reading, and as always, appreciate having you here.
— Ben
PS
If you are an American 50+ and want to emigrate within the next 0-5 years, and don’t want to navigate healthcare, banking, visas, taxes and country selection by yourself, reply to this mail with “Retire”.
You’ll get an invite to the “Retire Abroad Priority List” with some of my best tactics for retiring abroad.
Very helpful. Thank you! Can you do a similar analysis for Portugal, please?
One is still taxed in the US on 401K withdrawals correct? It is just offset by the 7% tax?