Happy retired people | Are US pensions taxed in Italy?

ARE US PENSIONS TAXED IN ITALY? OUR 2020’S GUIDE

Are US pensions taxed in Italy?

Do you live in the US and you are planning to retire in Italy?
Are you a retired person from the US and you start to live in Italy? Are you an American retired and you spend some months of the year in Italy?

Read this article and figure out if your US pension is taxable in Italy.

​In case you are not an official resident

As you might already know, Italian tax residents are required to pay tax on their worldwide income.
Therefore, if you are residing in Italy for 3 months or less, you are not deemed as a tax resident, thus you do not have to worry about paying taxes on your American pension in Italy.
Be aware that, according to the US state department, American citizens staying in Italy for more than 3 months per year, are considered tax resident overseas.
From a legal point of view, if you do not hold a EU passport and you plan to stay in Italy longer than 90 days, you are required to obtain a VISA to enter the country and then apply for a residence permit (or “permesso di soggiorno” in Italian). This procedure is administered by various entities, such as the immigration office, the Italian foreign embassy and, at some point, your local post office.

If you are a pensioner and you want to move to Italy quickly, we advise to opt for the Elective Residence VISA. You can get more information in regards to our VISA program in our Immigration section.

They will give you an application kit to fill. After giving it back to your local post office, they will address you to a local police station to present your official demand which is scrutinized and, hopefully, approved.

​Upon being granted your residence permit and owning or leasing a residential property, as an American citizen, you can finally apply for residency at your local Comune. You will then obtain your certificate of residency (“certificato di residenza”) from the local Vital Statistics Bureau (or Anagrafe) and you can enroll under the Universal Health Care system of Italy.

Happy retired people | Are US pensions taxed in Italy?

In case you are a resident in Italy

As a general rule, American pensions are taxed in Italy. However, there are few exemptions as explained by the double taxation treaty with US.
We can divide foreign pensions in two categories:

  • Pensions for public functions paid by a foreign country (or by one of its political or administrative subdivisions), for services and work carried out on behalf of these entities;
  • Private pensions paid by entities, institutions or insurance organizations of foreign countries appointed to handle the pension payments related to the termination of employment in the private sector

The first ones are normally ONLY taxable in the US, therefore no disclosure is required in the Italian tax return, whereas the second ones are taxable in Italy.
We recommend for more information, to check the double treaty agreements between the US and Italy.
If you find them hard to read or you do not know where to look, check out our video below about how to read them and how to find relevant information.

In case you have any doubts you may want to ask an international tax consultant, or to the American Embassy in Italy.

In case of Italian Nationality ​

In case you are an Italian citizen or you are applying for Italian citizenship, then you will be liable to pay Italian taxes on your public US pension.

In this case your American pension will be counted as a foreign income, therefore you must declare it in your income tax return and pay tax on it.
What about other sources of income?
In case you have other sources of income, besides your pension, you will be subject to pay Italian taxes on these earnings, unless there is an exclusion as provided by the Double Tax Treaty.

For more info about this check out our article about income tax rate in Italy.

2019’s 7% Tax regime for pensioners

To attract more pensioners, Italy introduced in 2019 a new tax regime. It consists of a 7% flat tax rate on all foreign sourced income. In addition to that, you do not have to disclose your foreign held assets and you do not pay any wealth tax.

However, you must acquire residency in a town with a small population (less than 20.000 inhabitants) located in the southern regions and Abruzzo as well, and receive a public or private pension at the time of relocation.

This tax regime lasts for 10 years, and it has been introduced as a response to many other Mediterranean countries launching similar programs, as well as repopulating Southern towns.

For more info check our video below.

Want to read more? Check out also our articles about filing your taxes in Italy, or airbnb taxes in Italy, or our guide for retiring in Italy.

If you are looking for a reliable partner to provide a full range of relocation service, please check our partner’s website Retire2Italy.

Do you need help in filing your annual income statement? Write to us.

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102 thoughts on “ARE US PENSIONS TAXED IN ITALY? OUR 2020’S GUIDE”

  1. I’m interested in retiring to Italy. But I’m not sure that I want to live in one of the Southern towns nor Abruzzo. I see that a foreigner can qualify for a 7% tax rate on retirement income if they move to the Southern regions, or Abruzzo. My preference would be to live someplace else, such as Rome, or Florence, etc. Can I still qualify for the 7% rate if I have a residence in say Abruzzo, and also have a second residence in Rome? If not, can you tell me what the tax rate would be for foreign retirees living in Rome?

    1. You may live somewhere else from Abruzzo, however the tax office can claw back your 7% regime in case of audit

      1. Hello Nicolo – I plan on retiring in Italy. My retirement income will be 100% from a public (government) pension. If I decide to acquire Italian citizenship will I lose eligibility for the 7% flat tax rate should I choose to live in Sardegna? Also as a retiree whether American or Italian Citizen will I have to pay the 43% tax rate since my income will be greater than 75,000 Euro? . . . which is really high. Any advice would be appreciated thank you.

        1. You won’t lose the 7% regime eligibility if you claim your Italian citizenship. Note that if you don’t claim your Italian citizenship, your public pension will not be taxable in Italy

  2. I am an American and Italian citizen that will have tax residency in Sicily and will elect the 7 percent flat tax. All of my income and assets are US sourced. It appears the US does not allow any foreign tax credits to avoid double taxation unless the income is foreign sourced. In effect, with only US income is it correct that we pay the full US tax bill without any offsets for the additional 7 percent paid to Italy? Thanks.

  3. We live in Abruzzo and are US government retired. No assets in the US. The IRS takes taxes out on out government retirement before we get them. We file our taxes in the US as our income is below 30,000 US.

  4. I receive Veteran Disability pay that is tax exempt in the US. Will I have to pay taxes on that if I am an Italian resident?

    1. Apparently yes. I have a state government tax exempt disability pension and my research shows Italy will want to tax it anyway.

  5. I live in Abruzzo and I have retired from my job working for the
    United States Postal Service. Does that qualify for the tax exemption here in Italy?

  6. I’m interested in the 7% program. To clarify, that’s only the national Italian income tax. I’d still have to pay regional/local income taxes, correct?

  7. I’m 65 my wife 64.
    We are both American and Italian citizens.
    We lived in Usa for many years.
    In 2020 we both lost our job due to covid 19.
    We sold our house.
    In May 2021 we moved to the south of Italy in a small town, because of the 7%.
    We are now residents.
    We will start getting social security money in 3 years.
    We are now living on money from 401K to plus some dividends of money we invested from the selling of our house.
    We found out contradicting informations.
    Is the 401K considered a US pension that qualifies us for the 7%?
    Or do we need to get money from the social security?
    In case of the second one should we get back to Aire residency in order non to lose the privilege of the 7%?

  8. Nicolò,

    Thanks for this great blog!

    My wife and I are dual US/Italian citizens who have never lived in Italy. I will retire next year from my non-government, private job in the US and we plan to move to Italy to live. Our sole income will be from my 401(k) plan, and, in approximately five years, from US Social Security payments. 2 Questions: (1) assuming we do not take advantage of the 7% plan, will we be fully taxed in both countries on my pension income, with no credits going either way? (2) same question, utilizing the 7% plan.

  9. Does government pension apply to only federal government or local as well? I will be retiring with a pension from a local government fire department I am assuming that is considered government pension in Italy since it does in US. And what of VA disability? That is a government agency as well so does that apply too?

    1. The government pension tax exemption applies to federal government as well as local subdivisions/departments of the federal government. VA disability is normally disregarded

      1. Sir, is there documentation that states that a US Govt Pension and VA Disabilities aren’t taxed? My wife and I are wanting to move to Italy and apply for the Elective Residence Visa and our income is solely from Govt Pension and VA Disability. Thank you for any advise.

      2. Hello,

        Can you please clarify what it means “VA disability is normally disregarded”? Does it mean that VA disability pension will be taxed in Italy as income?

  10. My husband and I purchased a house in Toscana and will want to move there permanently when we retire in 4 years. My income is mainly Social Security and a very small 401K and my husbands income will be from 401K, Social Security and a pension from a private employer. I am thinking of becoming a citizen through jure sanguinis. Would I be taxed higher on my social security and 401K if a citizen?

    1. You would be taxed in Italy regardless of your citizenship. The only exclusion is if you were a public employee during your life, in that event a non Italian citizen does not pay any income tax on it, whilst Italian citizens do

  11. How are Roth 401k and Roth IRA accounts treated ? These are not taxed in US because you contribute with after-tax funds. If you withdraw money from these accounts while you’re retired in Italy (Sicily, small village) will these funds be considered income you have to pay tax on in Italy ?

      1. David Castronuovo

        May I please ask (for a US citizen who is a legal resident of Italy), in addition to the 401K and Roth IRA you mention above, is a traditional IRA account also defined as taxable “pension” income?

  12. Hello, Nicolo,

    I would appreciate your clarification about what is counted as “Pensions for public functions”. We are applying for ER want to move to Lombardy for our retirement this Summer. My biggest source of income will be the social security payment. I worked for 25 years at the NJ public state University and I am considered a State employee. Will my sociail security qualify as “Pensions for public functions”? or it will be taxed in Italy? If it qualifies, what documentation is needed to prove it?

    Thank you in advance,
    Brian

      1. Hi Mr. Nicolò Bolla;
        I am in the same situation as Brian as I have a DOD PENSION (pension for government work /public functions) but I receive (set up by the Federal Government) social security and not sure if it would be exempt from Italian taxes ? So just to clarify if I become a resident of Italy would my Social Security be taxed even though I was a former DOD GOVERNMENT WORKER? I’m still not sure? And thanks!

  13. Hello Nicolo,
    If I take an early distribution from a 401k pension (private) in the US and am a tax resident of Italy/dual citizen it would be taxed as regular income in Italy, correct?
    Since the early withdrawal is subject to an additional 10% early withdrawal fee in the US (in addition to US income tax), does the double taxation treaty account for the early withdrawal fee or would it be in addition to the applicable income tax in Italy?
    Thank you in advance.

  14. Nicolo,
    Is it true that if I take advantage of the flat 7% tax I can’t claim a tax credit for the foreign taxes I would pay in Canada and USA for my pension income? I also get 25% withholding tax taken on our Mineral Rights cheques.
    Thank you again

  15. Nicole two clarifications please. Is the 43%tax rate on American residents on ALL qualifying income if it is over 75,000 euros or only on the portion over 75,000? Second do you file Italian taxes first and then get a credit for Italian taxes paid on your American taxes based on the double taxation rule? Thanks

  16. I want to ensure no double taxation; American citizen and I would get an extended visa in Italy, and would live off my investments. I will pay capital gains taxes in the US. What taxes would be due in Italy? Thanks!

    1. Capital gains are taxable at 26% rate in Italy, however they don’t provide any tax credit for foreign taxes. I advice to pay tax in Italy first and then claim it in your form 1116 in the US. In Italy you must report your capital gains as well as your foreign held assets

  17. I am an American UN pensioner desiring to become resident in Italy. Is my UN pension considered public or private? Since it is for service as an international civil servant it seems that it must be public not private and hence I will not be taxed on it in Italy. Is that correct? I will have to pay taxes on it in the US. This is very important because if my UN pension is not taxed in Italy I will not need the 7% tax deal and will be able to reside outside the exempted regions. I have looked everywhere to get a clear answer on this but to no avail. Can you answer my questions? Thank you

    1. Your pension may not be taxable in Italy depending from its source. Please get in touch with us so we can advise on your matter

      1. The source of my UN pension is the UN Joint Staff Pension Fund in New York which issues checks to every UN retiree member. Is that what you mean by source? Thank you.

      2. Good morning Nicolo, I am in the same situation as Janet above regarding receipt of a pension from the UN. Grateful if you can confirm if it’s your current understanding that the pension would most likely NOT be taxed, but any social security may be. Sincere thanks in advance. Best, Joe

  18. I am a state employee who will retire next year with a pension and social security. Will these be taxed in Italy if I am there more than 183 days? There are also private accounts which I presume will be taxed (IRA, etc.). Also I have read conflicting information on the 7% flat tax. Is it for 5yrs or 10yrs? Does it start from when you start living in Italy greater than 180 days and start collecting your pension?

    1. The 7% flat tax is for 10 years, and you can access it you will receive any type of private or public pension from overseas. If you become a resident of Italy, your worldwide income is taxable

  19. If I retire in italy with a US state pension and obtain italian citizenship, will I be eligible for italian tax credits on my pension income that I will most likely pay tax on in italy?

  20. So confused 🤔
    Husband is Italian & US citizenship. We retired in Italy Monte Argentario (his hometown) I’m American only have resident status.
    Our only source of income is his US Social Security which is less than 35K
    We have an annuity but not drawing from that yet.
    Filed US TAXES & FBAR for an act here in Italy under 10K.
    Italians saying we don’t have to pay Italian taxes – just making sure as we are FT here and own our home here (no real estate in the US). I am concerned reading about the Wealth Tax at 26%? Does that apply to his US SS?
    Thank you in advance

    1. Wealth tax is 0.2% of your foreign held assets. Note that your Social Security pension may be taxable in Italy

  21. So confused 🤔
    Husband is Italian & US citizenship. We retired in Italy Monte Argentario (his hometown) I’m American only have resident status.
    Our only source of income is his US Social Security which is less than 35K
    We have an annuity but not drawing from that yet.
    Filed US TAXES & FBAR for an act here in Italy under 10K.
    Italians saying we don’t have to pay Italian taxes – just making sure as we are FT here and own our home here (no real estate in the US). I am concerned reading about the Wealth Tax at 26%? Does that apply to his US SS?
    Thank you in advance

    1. Wealth tax is 0.2% of your foreign held assets. Note that your Social Security pension may be taxable in Italy

  22. Hi Nicolo,
    We plan on retiring in Italy before we start taking our Social Security benefits. How can we qualify for the 7% flat tax? We planned on living on cash that we have after we sell our house. It that possible?
    Grazie

  23. Thank you for this helpful blog. My husband and I are working toward retiring in Italy in a year or two on Social Security (from private sector work) and income from rental property, as well as small RMDs from traditional IRAs. We are trying to decide the best way to hold our assets and generate income, and minimizing taxes. If we live in the South, will we be taxed on net income from the rentals? Or gross? Will we pay wealth tax on the market value of the properties?

  24. Ciao Nicolò,
    Thank you for all the interesting information.
    I am soon going to move to Italy after having lived in the US and UK. I am an Italian and British citizen and I am not quite yet at retirement age.
    I have a traditional IRA (rollover from a 401(k)) and UK SIPP (self invested pension plan). They both are made up of pre tax money and capital gains and dividends are not currently taxed.
    Upon moving to Italy, would I need to declare these as financial assets abroad and pay the 0.2% wealth tax on them?
    What about capital gains and dividends would they still be not taxed or would I need to start declaring them in my Italian tax return?
    Grazie.
    Ciao, Paolo

    1. Nicolò Bolla

      No wealth tax on private pension funds. You are not liable to pay cap gains tax until you withdraw the funds

      1. Thank you Nicolò, very helpful. Do you know if the same holds through for UK’s ISAs (individual savings accounts)? Those are made up of after tax funds, attract no tax for capital gains and dividends and have no constraint on withdrawals while there are constraints on the contribution per year.
        I would expect these are not pension funds and hence do not attract any beneficial treatment in Italy?

  25. Italian/USA citizen with a USA government pension and rental income combined over 100,000 euro annually, if I lived in Palermo would both be taxed at only 7%? And then pay the remainder to USA deducting the 7% paid to Italy?

    Also I didnt understand the roth too clearly? Are USA Roth accounts taxed in Italy?

    Thanks

    1. Palermo does not qualify for the 7% regime. You need to find any municipality with 20,000 inhabitants or less

  26. I am considering retiring to Italy in the next several years. I will only have my Social Security and pension from state employment. Will either of those be taxable?

  27. Dave Magliozzi

    Hi Nicolo,
    My dad is a dual citizen retired (74) moving back home to Italy. He has both federal social security benefits and employment retirement benefits with his bank and another bank institution. How does he transfer those into Italian banking sources? What is the protocol so he can receive his benefits residing in Sperlonga, Italy.

  28. Hi Nicoló,
    We are planning in the next year or 2 to split our time between our home in Los Angeles and a home in Puglia, living off rental income and dividends. Our income will be well above €100k, and I’m not sure I want to give up our California residence status because we do noy want to sell our home. Can you explain what the tax implications of this would be? I am trying to plan financially, and that is proving quite challenging.

    1. Dear Jessica,

      if you want to stay in Italy for more than 90 days in a row you need to have a residence permit, however if you move between the two countries you may not trigger Italian tax residency. This topic is fairly complicated and requires a good planning to achieve that

  29. Hi I only have Social Security and cash from the sale of my mum’s home.
    Will I be taxed or does the 7% apply?
    Also can I get residency?