Italy 7% flat tax: Where can retirees live? 30,000 cap lifted

On 7 April 2026, Italy raised the population ceiling on its 7 percent flat-tax regime for foreign retirees — from 20,000 inhabitants to 30,000. The change is buried in the Legge annuale PMI (L. 11 marzo 2026, n. 34, art. 26), and barely made the English-language press. But if you're thinking about retiring south, it's a meaningful shift.

The regime itself isn't new. Since 2019, retirees moving to a small comune in the Italian Mezzogiorno have paid a flat 7 percent on all foreign-source income. That covers pensions, dividends, rents — the lot. The deal runs for up to ten years.

The catch was always the population cap. At 20,000 or fewer, most of the towns retirees actually want to live in were ruled out. Raising the limit to 30,000 puts a different class of town in play — places with real infrastructure, not just charm.

"Raising the maximum to 30,000 inhabitants is an important update to this fiscal regime. For the first time, retirees can choose towns with real infrastructure — a proper hospital, a train station, an existing expat community — without sacrificing the tax benefit. That changes the conversation from 'Can I manage here?' to 'Do I actually want to live here?', which is a much better place to start."

— Boston Englehart Vicario, CEO, Finding La Dolce Vita

Below, we cover (pun somewhat intended):

• How the regime works
• Who actually qualifies
• Five towns now in scope.
• The health-insurance piece nobody talks about
• And the residency trap most retirees underestimate.

Let’s kick it off.

What the regime actually is

The legal basis is art. 24-ter TUIR (D.P.R. 917/1986), introduced by Legge 145/2018 and most recently amended by L. 34/2026. The mechanics, in plain English:

• A flat 7 percent substitute tax (imposta sostitutiva) on all categories of foreign-source income — pensions, dividends, interest, foreign rental income, foreign capital gains, royalties.
• Valid for the year of transfer plus the nine subsequent tax periods — ten years in total, not renewable.
• Foreign assets are exempt from Quadro RW reporting and from the IVIE/IVAFE wealth taxes for the duration of the regime.
• Italian-source income — such as an Italian rental or a business — is taxed at the standard IRPEF rates. The 7 percent applies only to income produced outside Italy.
• No foreign tax credit on income covered by the 7 percent. If your home country withholds at source, that withholding is a real cost to weigh.

Election is made on the Modello Redditi PF, Quadro RM, Sezione XVIII for the year residency transfers, with the tax paid annually via F24 (tributo 1899) by the IRPEF saldo deadline. Miss a payment beyond the next saldo and the regime falls away automatically and retroactively — there is no second warning.

Who qualifies, and who often thinks they do but doesn't

Three conditions, all hard:

• A pension paid by a foreign entity — US Social Security, the UK State Pension, US/UK/EU private and occupational pensions all qualify.
• No Italian tax residency in the five tax periods preceding the option.
• Transfer of residency from a country with an administrative cooperation agreement with Italy. All EU states, the USA, UK, Canada, Australia and most OECD members qualify.

Three profiles routinely fall outside the regime despite assuming otherwise. They are worth flagging because they are the conversations that come up earliest in any consultation:

The returning dual national. An Italian-American or Italian-British retiree, AIRE-registered for years, who came back recently — typically to care for a parent or settle an inheritance. If Italian tax residency has been re-established within the past five tax periods, even informally, the five-year window has not closed.

The INPS-only retiree. A career-in-Italy pensioner drawing an INPS pension and a small foreign Social Security top-up. There is a foreign pension on paper, but the Italian payment is the substantive one — and the regime requires the foreign pension itself to do real work in the numbers. Many cases that look eligible on paper are not, financially, worth the move.

The foreign-property owner with strong home ties. Owning a house abroad does not disqualify anyone. Maintaining a fully furnished, primary-feeling home abroad, with family in it and frequent visits, is the fact pattern that creates audit risk. More on that below.

Where you can move — five towns now in scope

The eligible regions are eight: Sicilia, Calabria, Sardegna, Campania, Basilicata, Abruzzo, Molise, Puglia. Population is fixed at the ISTAT figure from 1 January of the year preceding the option and locked in for the full ten years.

Five towns now in scope that Finding La Dolce Vita consistently recommends to retiree clients post-update — all between 20,000 and 30,000 inhabitants, all with the infrastructure that the old 20K cap excluded:

• Ostuni, Puglia (≈29,800). The white hill town above the Adriatic. Established expat community, train station, Brindisi airport nearby; the most mature international market on this list. Asking prices around €2,570 per m² — comfortably the most expensive on this list. The easy entry for buyers who want infrastructure first.
• Manduria, Puglia (≈29,500). Primitivo wine country, quieter pace, around €1,000 per m² asking — roughly a third of Ostuni. Thinner market, slower resale, better suited to committed buyers than to those who want easy liquidity.
• Galatina, Puglia (≈25,200). A Baroque town in the Salento, close to Lecce and the coast, at roughly €830 per m². The best value on this list for buyers comfortable being slightly off the obvious expat circuit; Lecce itself trades above €1,500.
• Noto, Sicily (≈24,600). UNESCO Baroque, warm sandstone, a pedestrian corso, the Vendicari reserve and the Marzamemi coast within reach. Asking around €1,740 per m². The best-value window in the historic centre has partly closed; renovation projects and countryside properties remain attractive.
• Agropoli, Campania (≈21,800). Cilento coast — Bandiera Blu beaches, a medieval castello on a sea cliff, a hospital, a train station, Salerno 40 minutes and Naples 90. Asking €1,930 per m², materially cheaper than the Amalfi coast for genuinely comparable scenery.

All figures are asking-price averages drawn from mid-2025 portal data, cross-referenced with OMI data from the Agenzia delle Entrate. Transactions typically close 7–12 per cent lower; markets in small southern towns are often illiquid, with months between listing and sale.

The piece nobody talks about: health insurance

The 7 percent regime tells you nothing about health coverage. The Elective Residence Visa that allows retirees to enter the country requires private health insurance valid in Italy at the consulate stage and again at the permesso di soggiorno stage. Once enrolled in the Servizio Sanitario Nazionale as a resident, a private layer continues to do real work — English-speaking specialists, shorter waits, out-of-Italy travel cover for visits home. Feather's expat health policy is built for exactly that transition; the cover satisfies the consulate, renews with the permesso, and continues to work when you fly back to see grandchildren.

The trap most retirees underestimate: residency, not paperwork

The most common way the regime quietly falls apart is not non-payment. It is residency drift.

A retiree elects, moves to a Mezzogiorno town, and lives there genuinely in year one. Then something draws them back. A grandchild is born; a parent falls ill; four or five months a year abroad becomes the norm. The Italian bank account goes quiet. The Italian SIM lapses. By year three, the digital footprint looks more foreign than Italian, even though the retiree still considers themselves based in Italy.

That is precisely the pattern the Agenzia delle Entrate examines when assessing whether the centro degli interessi vitali — the center of vital interests — actually sits in Italy. If, on audit, the center is found to lie elsewhere, the residency transfer that unlocked the regime is treated as never having been substantive in the first place. The saving is recoverable retroactively. Standard IRPEF applies to the years in question.

The lesson is straightforward. The 7 percent regime is not a tax holiday for part-time residents. It rewards moving properly. The good news, after 7 April 2026, is that the towns where moving properly is also enjoyable are no longer the exception.

About Finding La Dolce Vita: End-to-end relocation and immigration support across Italy, France, Monaco, Greece, Malta and Spain — from first consultation through residency, property, ongoing helpline and lease management.