Italy’s 7% substitute-tax option can appeal to someone relocating with a pension paid by a foreign provider. It is a specific election under Article 24-ter of the Italian income-tax code, not an automatic rate for every retiree or every town. Check eligibility, the source of each income stream and your home-country treaty position before committing to a move.

Who can elect the regime?

The law requires pension income of the type described in Article 49(2)(a), paid by a foreign entity, and a move of Italian tax residence to a qualifying municipality. The tax agency also requires that an applicant has not been an Italian tax resident in the five tax periods before the election and that the move is from a jurisdiction with administrative tax‑information cooperation with Italy. A freelance income stream alone does not meet the foreign‑pension condition; having a pension does not automatically establish that every other income receipt qualifies as foreign‑source. (Agenzia Entrate – Istruzioni PF 2024, public PDF); (Agenzia Entrate – Istruzioni PF 2024, fallback PDF). Operative rules for exercising and managing the option are set out in the Director’s Provvedimento of 31 May 2019, prot. 167878 (see linked public PDF mirrors below), which the agency also cites in its scadenzario.

Which municipalities qualify in 2026?

The current statutory text lists Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise and Puglia, plus specified municipalities connected with the 2016 and 2009 earthquakes. A law published on 23 March 2026 replaced the former 20,000‑resident limit in Article 24‑ter with 30,000 residents. The official Gazzetta Ufficiale text and the Finance Ministry’s consolidated database reflect this change. The tax agency’s 2026 payment calendar entry also shows the 30,000 limit and lists F24 code 1899, while some precompilata/return‑guidance pages still describe 20,000. Because those pages conflict, confirm the exact municipality and applicable population reference with the agency or a qualified Italian tax adviser; do not rely on a town’s current approximate population or an older list. (GU 23 March 2026 – PDF); (GU HTML article fallback); (DEF – Art. 24‑ter consolidato); (Agenzia Entrate – Quadro RM page still showing 20,000).

Population data reference: the Director’s Provvedimento (31 May 2019, prot. 167878) states that the relevant population figure is the ISTAT “Rilevazione comunale annuale del movimento e calcolo della popolazione” as of 1 January of the year preceding the first year of the option, and that this reference remains valid for the whole option period as long as residence is not moved to a different municipality (with a specific rule if you later move to another qualifying municipality). Confirm with your adviser that this criterion continues to apply with the 30,000 change and whether any special rule applies to earthquake‑area municipalities. (Provvedimento 31 May 2019 – public PDF mirror); (additional public mirror).

How do you elect the option?

Per the 31 May 2019 Provvedimento:

• The option is perfected by filing the Italian income‑tax return for the tax year in which you transferred residence to a qualifying municipality (first election year).
• In that return you must indicate, among other items, five prior tax years of non‑residence, the cooperation jurisdiction(s) you are moving from, the foreign pension payer’s State, and any States you choose to exclude from the 7% regime. Ask your adviser about timing/limits for changes in later years.

(Provvedimento 31 May 2019 – operative rules).

What does 7% cover?

Article 24‑ter describes a 7% substitute tax on qualifying foreign‑produced income of any category during valid election periods. The foreign pension is the entry condition, but the possible tax base can extend beyond that pension. Italian‑source income is outside this substitute‑tax base and may be subject to ordinary Italian rules. Foreign‑source classification follows Article 165(2) criteria and can be technical for work, property and investments; “paid by a foreign client” is not by itself a reliable test. (DEF – Art. 24‑ter consolidato); (GU 23 March 2026 – PDF).

How long does the option last and when is it paid?

The option can apply for up to ten tax periods starting with the first year of election. Payment is made annually, in a single installment, by the deadline for the balance of income taxes, using F24 code 1899; for 2026, the agency shows a due date of 30 June 2026. Some years allow payment within late July with a 0.40% addition. The 2019 Provvedimento provides that failure to pay in full by the balance deadline results in decadenza from the regime for that year, so always check each year’s calendar and mechanics in advance. (Agenzia Entrate scadenzario 2026: 30,000 cap and F24 code 1899); (Agenzia Entrate scadenzario: late‑July with 0.40% addition); (Agenzia Entrate – codice tributo 1899 page); (Provvedimento 31 May 2019 – payment/decadenza mechanics).

Before relocating or filing

• Identify the pension payer and the legal character of each income stream.
• Document the previous five tax periods of residence and verify the country‑of‑origin cooperation requirement.
• Ask an Italian tax adviser to check the municipality against the current statutory text and population data, and to explain election timing, duration, foreign‑tax treatment and treaty effects for your circumstances.
• Per the Director’s 31 May 2019 Provvedimento, the population figure is the ISTAT municipal survey as of 1 January of the year before the first option year; confirm with your adviser that this still governs after the 2026 change and whether any earthquake‑area nuances apply.
• Confirm the annual payment method and deadline (for 2026, the agency shows F24 code 1899 and 30 June), and keep the official acknowledgments with your records.
• If you intend to exclude specific foreign States from the regime, note that the exclusion is indicated in the return; confirm with your adviser how changes are handled in later years.
• Keep the official source pages and the adviser’s written analysis with your relocation plan.

Sources checked 18 September 2026: Gazzetta Ufficiale, 23 March 2026, Article 26 amending Article 24‑ter (PDF); Gazzetta Ufficiale, HTML fallback for Article 26; Finance Ministry consolidated text of Article 24‑ter; Agenzia Entrate 2026 scadenzario entry (shows 30,000 cap and F24 code 1899); Agenzia Entrate – late‑July scadenzario entry (0.40% addition); Agenzia Entrate – Quadro RM (still showing 20,000); Agenzia Entrate, Istruzioni PF 2024 (public PDF); Agenzia Entrate, Istruzioni PF 2024 (fallback PDF); Provvedimento del Direttore dell’Agenzia delle Entrate del 31 maggio 2019, prot. 167878 (operative rules; public PDF mirror); Agenzia Entrate – codice tributo 1899 (public page). Check later amendments before using this guidance.