There is a provision in Italian tax law that allows American retirees to pay a flat 7% on all of their foreign-sourced income for ten consecutive years. Social Security, pension distributions, investment income, rental income from US properties — all taxed at a flat 7%, regardless of amount, in qualifying southern Italian municipalities.

What the Programme Is

Article 24-ter of the Italian TUIR allows individuals who transfer their tax residence to qualifying municipalities in southern Italy to elect a substitute flat tax of 7% on all income produced abroad. The election covers a maximum of ten consecutive tax years. Italian-sourced income is taxed at ordinary progressive rates 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. You must also genuinely transfer your tax residence — established through anagrafe registration and spending 183+ days per calendar year in Italy. No age requirement. No property purchase requirement.

Where It Applies

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. Your Italian tax advisor must confirm the qualifying status of your specific target municipality before you structure any purchase around this election.

How the Election Works

The election is made annually in your Italian income tax return (Modello Redditi PF). It must be renewed each year and lapses automatically after ten years. Revocation is permanent — you cannot re-elect after revoking. Budget €2,000–€4,000 per year for Italian tax compliance with a qualified commercialista.

The US Tax Dimension

The United States taxes its citizens on worldwide income regardless of where they live. The 7% election does not remove US tax obligations. The US-Italy tax treaty and Foreign Tax Credit mechanism apply to avoid double taxation, but the calculation requires specific professional modelling for your income profile. FBAR and FATCA reporting obligations remain for all qualifying foreign accounts.

Who the Programme Actually Suits

American retirees with meaningful foreign passive income ($80,000+/year) who have a genuine interest in living in southern Italy. It is a poor fit for buyers who want to live in Rome, Florence, or Milan (not qualifying); buyers whose income is primarily Italian-sourced; and buyers who cannot genuinely transfer their Italian tax residence.