[00:00:03] Speaker A: It's Saturday morning in Italy and you're listening to the Magic Towns Italy podcast.
[00:00:08] Speaker B: Here's the big question, maybe the final piece of the puzzle for some people. How do you make the move financially Smart. Especially if you're thinking about retirement or just a big life change.
[00:00:19] Speaker C: Well, this is where Italy offers something quite remarkable actually. It's a special tax regime, a 7% flat tax on non Italian income.
It's specifically designed to attract certain foreign retirees and even Italians who've lived abroad and are returning to relocate to particular small towns.
[00:00:39] Speaker B: Hold on. 7%?
A flat tax of 7% on foreign income sounds almost too good to be true. There must be catches, right? What are the specifics?
[00:00:48] Speaker C: Yeah, it does sound amazing, and it is. But yes, there are specific qualifications you need to meet.
It's precise. First, crucial one, you cannot have been tax resident in Italy for the previous five tax years.
So you need to be genuinely moving there or moving back after a long time.
[00:01:08] Speaker B: Okay, five year absence. Got it. Second, you need to be receiving a foreign pension.
[00:01:12] Speaker C: This is key. It covers things like, say, a United Kingdom State pension, United States Social Security, private pensions.
Even regular IRA withdrawals can qualify.
[00:01:26] Speaker B: So pension income is the trigger.
[00:01:29] Speaker C: Generally, yes. It's geared towards pensioners. And third, the big one, you must move to an eligible town. This means a town with a population of 20,000 or less located in one of Italy's southern regions, Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Malise or Puglia. Or it can also be one of the specific communes with under 20,000 people in the earthquake affected zones of central Italy, parts of Lazio, Umbria and Marches.
[00:02:00] Speaker B: Right, so specific locations, smaller towns in the south or those specific central zones.
[00:02:06] Speaker C: Exactly. And if you meet all that, you need to actively choose this regime, elect for it on your very first Italian tax return.
If you do, it can apply for up to 10 consecutive tax years.
[00:02:20] Speaker B: 10 years. That's a really significant period. So what income exactly gets this amazing 7% rate? Just the pension or other foreign income too.
[00:02:30] Speaker C: It's actually quite broad for foreign sourced income. So yes, your foreign pensions, public or private, but also potentially foreign employment income or freelance income earned from clients abroad, overseas. Rental income, dividends from foreign stocks, interest, royalties, even other foreign gains. It covers a lot. And importantly, It's a flat 7% calculated on the gross amount of that foreign income. No deductions against it.
[00:02:59] Speaker B: Gross amount. Okay, but what about income inside Italy? If I moved there and decided to, I don't know, do some consulting work locally?
[00:03:08] Speaker C: Uh, good question.
Any Income you earn from Italian sources, like that local consulting work, or maybe rent from an Italian property you bought that gets taxed normally under Italy's standard progressive income tax rates, called IRPEF.
You can't mix and match the 7% regime with other special flat tax regimes Italy offers for foreign income, either it's one or the other.
But beyond the low rate, there are other practical pluses. You can actually move between different qualifying 7% towns during those 10 years, or without losing the benefit, which is handy and maybe just as important for some. You get significant relief from reporting foreign assets. Normally, Italian residents have to declare all worldwide assets annually on specific forms. RW, they're called. Under the 7% regime, you're generally exempt from that for your foreign assets. That simplifies paperwork a lot.
[00:04:08] Speaker B: Oh, that's a huge bonus. Dealing with complex tax forms is never fun.
[00:04:12] Speaker C: Definitely not.
So just to give a flavor of the kinds of places that qualify, a quick list.
You could consider Scaia in Calabria. It's a seaside town, prices are low and it's got a train link up to Naples. Or Venoza in Basilicata, a really historic Roman and medieval hill town famous for its Aglianico wine.
Down in Puglia, maybe Tricose, you get that unique Cilento culture, Greek influences. Amazing coast. It's only five minutes from these beautiful crystal clear coves.
[00:04:47] Speaker B: Salento is stunning.
[00:04:48] Speaker C: It really is. Or up in Sardinia, Tempio Pasania, known for its dramatic granite landscapes. It's cooler in summer than the coast and has a big jazz festival. And back in Sicily, Cefalu, it's got a famous UNESCO list, Norman Cathedral, a really lively beach scene, lots going on with tourism.
So a real mix of vibes.
[00:05:11] Speaker B: It's a great little snapshot. Shows the diversity, doesn't it? Seaside hills, history, culture, sure.
[00:05:17] Speaker C: So, okay, the 7% tax is clearly a massive potential draw.
[00:05:22] Speaker B: But what I'm hearing, weaving through everything we've discussed, is that the real win isn't just the tax rate, is it? It's finding that place, that town, that lifestyle, that genuinely feels right for you.
[00:05:34] Speaker C: Exactly. The tax is an enabler, a fantastic one for those who qualify. But it shouldn't be the only driver. Combining this kind of data, affordable towns, lifestyle factors, tax benefits, with eventually going there yourself, doing a proper scouting trip. But that's how you make the best decision. It's about being informed, not just dreaming.
[00:05:57] Speaker B: Right. Making an informed dream, perhaps. It really shifts the perspective, doesn't it? Seeing Italy not just as a holiday spot, but as a place you could genuinely build a life, really does.
[00:06:08] Speaker C: And it's all about making those informed decisions. Like we said, exploring all the angles, understanding the possibilities that lets you envision a future in Italy that's both, you know, deeply enriching but also financially sustainable. There's always more detail, of course, but hopefully this gives a strong starting point. Seeing these different pieces together is key.
[00:06:30] Speaker B: If that's your dream and if you are ready to take that next step to explore these towns in more detail than maybe use that Town Explorer tool we mentioned or get the full list of places qualifying for the 7% tax you absolutely need to check out Magic Towns Italy.
[00:06:43] Speaker C: That's the resource, yes.
[00:06:44] Speaker B: Go to MagicTowns. Seriously, consider your roadmap. Whether you're planning a move or just a deeper kind of journey to Italy, it's all there. Definitely worth a visit.
[00:06:53] Speaker A: That's it for this week on Magic Towns Italy. You can create a free
[email protected] and explore over 2,000 towns, including those offering the 7% tax scheme, as well as download dozens of expat guides.
We have over 200 data points per town, more than Italy's statistics authority itself, covering everything from property prices to schools, healthcare, crime and more. If you want full access to filters and unlimited searches, upgrade to MagicTowns Premium. Use the code PODCAST for 20% off an annual plan. Thanks for listening. Our next podcast will be live on Saturday at 9:00am.
