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.

23 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

  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 ?

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top