Italy is preparing to introduce a new tax regime aimed at a precise category of returnees: foreign-resident pensioners drawing an Italian pension who choose to come back to small towns in the country’s depopulated inner areas.
The headline rate is striking, 4% flat on worldwide income for fifteen years, but what really sets the proposal apart is a feature missing from every existing Italian regime: the Italian pension itself qualifies for the flat rate.
If approved, this would be the fifth Italian regime designed to attract human capital, and the third sitting inside the country’s income tax code (the Testo Unico delle Imposte sui Redditi, or TUIR). The other two TUIR regimes are the well-known “neo-residents” lump-sum regime and the 7% regime for foreign pensioners.
The remaining two, the impatriate regime and the regime for researchers and academics, sit in separate legislation. Each has filled a different niche in Italy’s effort to bring people, capital and pensions back into the country. The proposed regime, technically inserted as a new Article 24-quater, addresses what until now has been the most underserved profile of all: the long-term Italian expatriate retiree drawing an Italian pension.
How it would work
The eligibility conditions are tight but straightforward. The applicant must be a holder of a pension paid by an Italian public or private social-security institution. They must have been non-resident in Italy for at least the five preceding tax years.
And they must transfer their fiscal residence to a municipality classified as “intermediate”, “peripheral” or “ultra-peripheral” within the National Strategy for Inner Areas, with a population below 5,000 inhabitants.
Once the option is exercised through the tax return for the year of relocation, a flat 4% rate applies for fifteen consecutive tax years. It covers all income, whether arising in Italy or abroad, to the extent it was not already taxed in Italy. The regime is revocable; failing to pay the substitute tax causes forfeiture, and a five-year cooldown applies before any new option can be filed.
Why the Italian pension matters
To understand why Article 24-quater is significant, it is worth contrasting it with the two flat-tax regimes that already exist in the Italian code.
The first, the flat tax regime, was launched in 2017 to attract wealthy individuals to Italy through a fixed annual lump sum on foreign-source income. The amount has climbed steadily, from €100,000 at inception to €200,000 in 2024, and to €300,000 (approximately US$351,000) from 1 January 2026 under the most recent Budget Law. For a retired person with a modest international portfolio, that lump sum has never been a realistic option.
The second, introduced in 2019, is the 7% regime for foreign pensioners. It taxes all foreign-source income at a flat rate, conditioned on relocation to a small municipality in southern Italy. The catch is that it works only for those drawing a foreign pension. Italian nationals who spent their working life at home, retired in Italy on an Italian pension, and only later moved abroad are excluded by definition.
This is precisely the gap the new regime is designed to fill. The bill’s lead sponsor, Senator Domenico Matera, is explicit about it. In the explanatory report attached to the originating bill, he writes that Article 24-quater is meant for the many residents abroad who hold an Italian pension and who can benefit neither from the €300,000 regime, because that amount makes no sense for them, nor from the 7% regime, because their pension is Italian and not foreign.
To these people, the report says, “the possibility is given to return to Italy, benefiting from a 4% flat Imposta sul Reddito delle Persone Fisiche (IRPEF) rate on all income received, including the Italian pension, for the part not already taxed in Italy”.
That last qualifier, “not already taxed in Italy”, is doing important work. It is an anti-erosion clause, applied stream by stream rather than category by category. The 4% rate cannot be used to convert into a softer regime any income flow that was already generating Italian tax revenue from the same taxpayer while abroad. So if a non-resident retiree owned an apartment in Bologna that he had been letting for years under the 21% flat rate on rentals, that rental income continues at 21% after his return; it does not migrate to 4%.
The same logic applies to dividends, interest, and capital gains on Italian financial assets that he was already declaring and on which Italian tax was already being withheld while resident abroad.
What enters the 4% are the income flows that, for that taxpayer, were not generating Italian tax revenue at all: the Italian pension itself (typically allocated to the country of residence under tax treaties, and therefore not actually taxed in Italy), the pensioner’s foreign-source income (which a non-resident does not declare in Italy), and any new Italian income that materialises only after the return, for instance, rental income from a property purchased post-relocation, or interest on Italian bonds bought after the move home.
The rationale is straightforward: Italy is happy to collect 4% on income that would otherwise produce nothing, the dormant pension, foreign assets, and future Italian flows, but it does not want to see existing Italian-tax revenue reduced under the guise of relocation.
The numbers behind the proposal
The economic case rests on data drawn from INPS, Italy’s national social-security institute, included in the bill’s explanatory report.
INPS pays pensions to recipients in roughly 160 countries. In 2023, more than 310,000 pensions were paid abroad, totalling approximately €1.6 billion (US$1.9 billion), equal to 2.3% of all pensions disbursed by the institute. Beyond that, there is a separate stream of pensions granted in the international regime, where contributory periods earned in Italy and abroad are aggregated through bilateral or multilateral agreements: of these, 36% are paid abroad, for a further €562 million (US$658 million) annually.
The fiscal observation made in the same report is that “such pensions paid abroad are generally taxable in Italy, save where double-tax conventions allocate the right to tax to the country of residence”, which they typically do. The result is that a substantial portion of the €1.6 billion in pensions paid abroad currently produces no Italian income-tax revenue.
By taxing returnees at 4%, the proposal converts a portion of that dormant base into actual revenue. Hence the sponsor’s claim of “no negative effect on public finances, and indeed a certain inflow for the Treasury”.
The original bill, limited to non-EU returnees, estimated a potential pool of around 30,000 individuals after excluding the traditional emigration regions of the Americas, the EU and Oceania.
The amendment now under discussion expands the scope to EU-origin returnees, materially enlarging the addressable population: the most travelled emigration corridors of Italian retirees over the past decade, Portugal, Spain, Cyprus, Greece, all sit within the EU.
Where it stands
The proposal moves on two parallel tracks. The standalone bill S. 1495 was filed in May 2025 by Senator Matera (Fratelli d’Italia) and assigned to the Senate Finance Committee, which opened discussion on it in January 2026 with Senator Filippo Melchiorre as rapporteur.
In late April 2026, an updated and expanded version of the same proposal was submitted as an amendment to the bill converting decree-law 38/2026, the so-called fiscal decree, under the joint signatures of Senators Matera and Roberto Orsomarso. The amendment expands the original perimeter on two dimensions: it admits returnees from EU as well as non-EU countries, and it raises the population ceiling for eligible municipalities from 3,000 to 5,000 inhabitants.
The conversion of decree-law 38/2026 must be enacted by 26 May 2026. If the amendment is adopted, Article 24-quater would enter into force at that point, with implementing measures issued by the Italian Revenue Agency over the following months.
What advisers should consider
For investment-migration practitioners tracking the Italian inbound landscape, three points matter. First, the regime reaches the segment of clients least well served by the existing architecture: long-time Italian expatriate retirees with modest foreign assets but meaningful Italian pensions.
Second, the financial gap is severe: an €80,000 pension (approximately US$93,600) that would attract roughly €27,000 (US$31,600) in standard Italian income tax would carry just €3,200 (US$3,744) under the substitute tax, a saving large enough to drive real relocation decisions.
Third, the territorial constraint is restrictive. Eligible municipalities are small and concentrated in specific areas of the country, opening complementary advisory work on housing, healthcare access, infrastructure and integration.
Whether the amendment will survive the conversion process unaltered is an open question. The “not already taxed in Italy” clause in particular will benefit from textual clarification or an interpretative ruling from the Revenue Agency before the regime can be operated reliably at scale.
But the proposal is the most concrete development on the Italian inbound tax map since the introduction of the 7% regime in 2019, and clients in the relevant profile, Italian nationals long resident abroad, drawing an Italian pension, considering a move home, should be following it closely.
