Review has begun in the Italian Senate’s Finance and Treasury Committee on a bill introducing tax incentives to encourage retirees to return to Italy. The measure targets pensioners who move their tax residence from non-EU countries to small towns – with no more than 3,000 residents – located in areas covered by Italy’s National Strategy for Inner Areas.
Under the proposal, eligible individuals would be allowed to pay a flat substitute tax of 4% on income of any kind, including income earned abroad, insofar as it is not already taxed in Italy. The preferential tax regime could be applied for up to fifteen tax years.
The incentive would be available to individuals who have not been tax-resident in Italy for the previous five tax years and who receive pension income paid by Italian public or private pension institutions.
The measure is part of a broader strategy aimed at repopulating and strengthening the social and economic fabric of Italy’s inner areas by attracting residents with stable sources of income. According to the latest data, approximately 310,000 pensions are paid by INPS to individuals residing abroad – just over 2% of all pensions disbursed by the institute – for a total annual cost estimated at around €1.6 billion. A significant share of these payments consists of international pensions, granted on the basis of contribution periods accrued both in Italy and abroad. The total value of these pensions amounts to roughly €562 million, a substantial portion of which is paid to beneficiaries living outside Italy.
From a demographic standpoint, pensioners residing abroad tend to be relatively elderly, with the majority over the age of 70.
