Because pension systems across Europe – and beyond – follow different tax models, understanding how Italy interprets them is essential for anyone planning their long‑term financial life here.

EET, ETT, or TTE?

Across the world, private pension systems follow a handful of tax models. The three most common are known as EET, ETT and TTE. These refer to how contributions, investment growth and withdrawals are taxed. Many countries, including the UK, use the EET model, where contributions and investment growth are tax incentivised and withdrawals are taxed at standard progressive income tax rates.

Italy, however, uses the ETT model, where contributions into a personal pension ( previdenza complementare) can be eligible for a tax deduction (up to a certain limit), the fund itself is taxed but at the time of the payment of the income a lower income tax rate is applied.

(Only a few countries use the TTE model, where contributions and growth are taxed but withdrawals are exempt).

These differences matter because when someone moves to Italy with a UK pension from the the Italian tax authorities will classify it according to Italian tax law interpretation.  Often, a commercialista is left with the decision of ‘using best logic and guidance from the Agenzia delle Entrate. This is where mismatches can arise: a pension designed under one model does not always fit neatly into another.

The EET model (UK)

The EET model is widely used and easy to understand. It allows individuals to save efficiently during their working life and then pay income tax on withdrawals in retirement. Many people from the UK arrive in Italy with personal pensions/SIPP’s/occupational defined contribution pension schemes etc, and the question becomes how Italy should treat them for taxation purposes?

Since Italy taxes its own pension funds during the accumulation phase, it would not make sense for a foreign pension to benefit from tax‑free growth abroad and then also receive Italy’s preferential tax rate on withdrawals. That would amount to a double taxation benefit, which the Italian system is not likely to provide.

The ETT model

Italy’s own system provides for a 100% tax deduction for contributions to a ‘previdenza complementare’ up to a limit of €5300pa (as at 1 Jan 2026) but then taxes the fund during the accumulation phase.  Italy also taxes withdrawals, although at a reduced rate for long‑term contributors of between 15 and 9% depending on the length of time contributions has been made.

Despite this, private pension participation in Italy remains low compared to the EU average. Limited tax incentives, restricted investment options and relatively high charges have made private pensions less attractive than other forms of long‑term saving. Many Italians prefer property or alternative investments, and the system has never fully encouraged widespread private pension participation.

Ultimately, the interpretation rests with the professional preparing your tax return, but with the ruling on this specific case in 2024, we can be assured that treating UK personal and occupational defined contribution pension income as taxable under standard Italian progressive income tax rates is the correct tax treatment in Italy.  Choosing a different approach may be possible, but it carries the risk of future reassessment by the Agenzia delle Entrate and possible back fines and penalties.

Qualifying Recognised Overseas Pension Scheme

For those planning to live outside the UK permanently, transferring a UK pension into a QROPS has been an option for many years. These schemes operate under EU‑aligned rules and are designed for individuals who no longer intend to reside in the UK.

The UK has now introduced (from 2025) an overseas transfer charge of 25% on transfers to QROP’s where the pension holder resides in a different state to the place where the QROP’s is registered.   Malta was used, prior to this ruling, as a way for EU residents to transfer their UK pensions away from the UK due to Malta’s status as an EU member state and it’s double taxation treaties with all other EU member states. (Italy does not have any QROP’s vehicles to which UK pensions can be transferred)  However, given the 25% overseas transfer charge this is not a suitable option for most people.

If there is an overseas tax charge on a transfer to a QROP’s, what can I do instead?

Since Brexit, UK pension providers and UK asset managers should no longer manage monies for non-UK resident individuals due to a loss of licensing and regulatory authority.    Therefore, you may find yourself in a position where

a) you are being refused any investment and /or pension advice

b) asked to transfer your pension to another pension provider who can work with you as an Italian resident

c) and/ or take the pension in one lump sum but NOT in income drawdown

Clearly all the options are unsatisfactory and c) itself could generate a big tax liability in Italy if you have a large lump sum, which becomes taxable in one year.

Bear in mind that the 25% tax free lump sum in the UK, would be taxable in Italy as income tax !  As a smart financial planning tip, it is always best to withdraw this sum before becoming a resident in Italy, if possible.

Therefore, the best advice is to transfer to a UK SIPP which can work with EU residents and will allow you the flexibility that a standard UK domestic SIPP would provide.  You can get access to a wide range of asset managers and low cost model portfolio solutions.   We work with such companies and regularly transfer pensions as a financial planning strategy to ensure you get access to the right advice in Italy based on your other incomes / assets.

Since 2019 Italy has been running a special tax regime of only 7% tax for pensioners (anyone drawing a retirement income) if they relocate to the Southern states of Italy.  (Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise or Puglia – or to certain areas affected by the 2009 or 2016 earthquakes)

The regime pensionati was always limited to towns/ cities, which had less than 20000 registered residents. However, from April 7^th 2026 it is extended to towns /cities with up to 30000 residents, which extends the number of possible towns/cities to which you could locate and more importantly have access to important services such as hospitals, medical services, shopping and sports facilities etc.

According to the Italian statistics agency (ISTAT), the majority of comuni in the southern states in this tax regime have less than 30000 inhabitants.     IN fact, if we look at how many have more than 30000 residents, the numbers are more startling:

Sicilia (Sicily): 30–35

Campania: 30–35

Puglia (Apulia): 25–30

Sardegna (Sardinia): 8–10

Calabria: 7–8

Abruzzo: 8–10

Molise: 0 (Only Campobasso and Termoli are near or above this threshold historically, but often fall under it depending on current census updates)

Important points you need to know!

Whilst this all sounds very exciting, there are conditions to the qualification.

• The pension plan, from which you will draw this income, must have been accumulated from earnings from employment.  (self employment or employed work).
• You WILL NOT qualify if you merely add a lump sum of capital into a pension plan before moving to Italy to try to qualify for the tax regime.
• The income that you draw from your pension will be assessed, and whilst there are no specific guidelines, it will need to be sufficient to support your lifestyle in Italy. This will vary from region to region and depending on who is assessing the application.   When you make the application, it is best to check with your commercialista at the time.
• The 7% tax is calculated each year on your ‘reddito complessivo’ (cumulative income) NOT just the income from your pension. Reddito complessivo in Italy refers to numerous potential income sources, as follows:

• Income from land or building situated outside Italy.
• Income from capital overseas (dividends, interest etc)
• Income from employed work from outside Italy
• Income from self-employed work where it takes place outside Italy from a fixed place of residence. E.g where you are registered for work purposes in the UK
• Income from businesses abroad.
• Capital gains from the sale of shares in non-Italian resident companies.
• Income from asset held outside Italy.
• Business income generated abroad
• Interest from bank accounts and deposit accounts, national savings and investments and other deposit based savings.
• Capital gains arising from the sale of shares in non-listed companies

Qualifying individuals pay a flat 7% substitute tax on all foreign-source income, in place of ordinary progressive income tax rates. You are also exempt from the property wealth tax and wealth taxes on foreign assets and are relieved of the foreign asset monitoring obligations that would otherwise apply.

In addition, if you do not have assets in ISA’s you may be able to ‘bed and breakfast’ assets in your portfolio before becoming resident in Italy, to reduce capital gains tax liabilities.

You may also be able to make better use of accumulation style investments rather than income distributing to reduce your tax liabilities even further.   Why pay even 7 % tax if you can pay zero?

(You pay 7% on capital gains and income ‘realised’ in a portfolio – not just used as income, and so an actively managed portfolio may produce realised, and hence,  taxable ‘Italian income’ even if you are not using it for living expenses!!)

If you are a business owner who is looking to retire or sell your business, then you might be able to use the tax regime to reduce your potential tax liabilities.

These are just a few of the possible financial planning considerations that you may need to make.

You will need to plan to get the best benefits from your 7% tax regime tax residency before, during the transition year to Italy and your Italian tax residency itself.

One of the questions I am asked regularly is how income from property held overseas is taxed in Italy. Many people wonder whether rental income is exempt from Italian tax because tax has already been paid abroad, and whether it is treated in the same way as rental income from Italian property.

To be absolutely clear, if you are an Italian tax resident, you must declare and pay Italian tax on the net profit from rental income on properties held overseas. The arrangement is reciprocal: if you were resident in another country and owned rental property in Italy, you would also be required to declare that income there.

Italian tax law states that the net profit, after allowable expenses, from property overseas must be declared in your annual Italian tax return. This net profit is added to your other income for the year and taxed at your applicable income tax rate. In addition to income tax, IVIE — the tax on foreign real estate — applies. IVIE is calculated as a percentage (currently 1.06% [2026]) of the property’s value (purchase value if outside the EU and cadastrale value equivalent if inside the EU) as defined by the rules of the country where the property is located. Even if tax has been paid in the country of origin, you are still required to declare the income in Italy, and annual declarations must be made regardless of foreign tax paid.

It is important to understand that all rental income from overseas property must be declared in Italy if you are an Italian tax resident, and what you declare is the net income after expenses rather than the gross amount. The net figure is then added to your other income and taxed at your applicable IRPEF rate. IVIE also applies to foreign property, and declaring the income and expenses in the country of origin can help reduce the taxable amount in Italy. Lower expenses result in a higher net profit and therefore higher Italian tax, while higher expenses reduce the net profit and may lower your Italian tax liability.

Depending on your goals, owning property overseas can work in different ways. If you have high expenses, the property may function well as a long‑term capital appreciation investment with little taxable income. If you have low expenses and high net income, particularly if you rely on the rental income in retirement, you may find yourself taxed at higher IRPEF rates in Italy.

During the course of my many conversations, one particular issue comes up all too frequently, and I felt I just had to write about it.

What am I talking about? I am referring to the basic bank accounts that people use in Italy — those accounts that were probably set up when you first moved here, perhaps because the person you were buying a house from suggested opening an account at the same branch to make life easier, or because you were referred to the local bank simply because “everyone uses it”, or because someone knew someone who could open an account for you even before you were officially resident.

Unfortunately, many of us are still being charged extremely high bank fees for very little service. Some of the traditional banks remain among the most expensive, and yet they are still widely used by foreigners who opened their accounts years ago and never revisited the issue. I continue to meet people who are paying unnecessary quarterly fees, high commissions on simple transfers, and additional charges for cash withdrawals or currency conversions. In some cases, the total annual cost can be surprisingly high.

Personally, I use two banks: one for personal use and one for business. My personal account is with Fineco, which remains one of the most efficient and user‑friendly online banks in Italy. It is fully digital, easy to use, and offers a very good app. Customer service is responsive, and the account has no standard maintenance fees if you meet basic usage conditions. Withdrawals from cash machines across Italy are free, and domestic transfers cost nothing. For basic banking, it works extremely well.

My business account is with Banca Intesa Sanpaolo, which is part of a larger national network. I chose this because, as a business account, I occasionally need to speak with the bank director, but otherwise I operate everything online. The monthly fee is modest, and transfers are inexpensive. It is more costly than my personal account, but that is to be expected for business banking.

There are also several other personal banking options in Italy that offer low‑cost or zero‑cost accounts, especially if you are comfortable with online banking. CheBanca!, ING, Hello Bank, Widiba, and N26, Revolut, and Wise all offer modern apps, free withdrawals, and free domestic transfers. Comparison websites make it easy to check current offers and see how much you could save by switching.

My simple message is this: pay some attention to your bank account in Italy if you have not done so for some time. It is not difficult to change accounts anymore, and with even basic Italian you can manage the process without problems. You could be making significant savings simply by switching to a more modern and cost‑effective bank. If someone is paying hundreds of euros a year in unnecessary fees, then it is certainly worth reviewing.

Take a moment to look at your recent bank statements and see what charges you are paying. Then compare them with what is available today. You may be surprised at how much you could save.

Spese Detraibili e Deducibili in Italia

Italy does not have a system of taxation with a tax free allowance system and therefore tax is paid from the very first Euro.

However, Italy does allow a number of tax deductible and detractable expenditures from taxable income.

Firstly, what is the difference between a tax deduction and a detractable expense?

• Deductible expenses (oneri deducibili)reduce your taxable income, meaning you pay tax on a lower income.

• Detractable expenses(oneri detraibili) give you a direct reduction in the tax you owe – usually a 19% tax credit on the value of item you are claiming, unless otherwise specified.

Both are valuable, and knowing the difference helps you understand how the savings work.

Healthcare expenses (19%)

Without a doubt the most common category is healthcare expenses (detractable at 19%)

What you can claim is as follows:

• Pharmacy receipts (scontrini parlanti) showing the name of the medicine and your tax code (codice fiscale)
• Doctor visits (GPs and specialists)
• Surgeries and hospital stays (private and public)
• Diagnostic tests, X-rays, and blood work
• Dental care (e.g., orthodontics, if medically necessary
• Physiotherapy and rehabilitation
• Medical devices (e.g., glasses, hearing aids, prosthetics) 

There is a ‘franchigia’ (excess) related to these expenses, which means that it is only the accumulated expenses over €129.11 which are considered eligible.

If your total health expenses are below this amount then you cannot detract from tax. (Equally, you cannot claim this credit if the expense is covered by insurance.

To give an example……if my total expenses are €800 during the year, then the calculation is €800 – €129,11 = €670,89, on which I apply the 19% tax credit = €127,47 tax credit.

It may not seem much but a few years ago I had to have some urgent dental care which cost €10,000. It was not covered by insurance and so I had to pay myself. That year I had a tax credit of €1875,46. Every little helps!

When you go to the farmacia make sure you present your codice fiscale to the pharmacist and they will normally tell you whether it is an item that qualifies or not.

** FARMACIA AND HEALTH EXPENSES ARE NOW REGISTERED AUTOMATICALLY ON THE AGENZIA DELLE ENETRATE (TAX AUTHORITY) WEBSITE.  YOU CAN ACCESS THE WEBSITE AND CHECK THEM YOURSELF,  HOWEVER THERE ARE OCCASIONS WHEN THEY DON’T APPEAR SO MAKE SURE YOU KEEP YOUR RECEIPTS AND GIVE THEM TO YOUR COMMERCIALISTA / FISCALISTA (ACCOUNTANT) WHEN YOU FILE YOUR RETURNS **

Home renovations and energy efficiency (various rates from 36% to 50%)

This is by far and away the next biggest category for gaining tax credits.

The key incentives for home improvements are as follows: (at at 2026)

• Bonus Ristrutturazioni(Renovation Bonus) – 50% for general home upgrades
• Ecobonus– 50–65% for energy-saving improvements (e.g., insulation, windows, solar panels)

On your ‘Prima Casa’ (first home) you can claim a 50% tax credit up to a maximum spend of €96000, spread over 10 years.(at time of writing)

On your second home or property (other than Prima Casa) it is a 36% on a maxi spend of €96000 spread over 10 years.
(excluding boilers which burn fossil fuels.)

• Sismabonus – 50% on Prima Casa for 2025 then 36% for 2026/27 for work related to protection against sismic risks. 30% from 2026/27.
• Bonus mobili (e grande elettrodomestici) – tax credit of 50% on spend of up to €5000 on electrical appliances and furniture that are linked to renovations.
• Nuovo contributo per elettrodomestici ad alta efficienza – 30% up to €100 discount on electrical domestic appliance purchases, outside renovation works
• Green Bonus – 36% on garden and green area improvements.

Insurance premiums

This is a category which people often fail to utilise because there are some questions over whether foreign insurance premiums paid can be deducted in an Italian tax return.

For policies that qualify as Life insurance, accident (both max €530) and long-term care insurance (LTC) – (€1291)

They must qualify (even if issued outside Italy) under the following conditions:

1. Policy must be with an EU or EEA-authorized insurer(i.e. the company must be licensed to operate in the EU/EEA under EU regulations).
2. The policy must cover eligible risks: life, accidents, disability, or Long Term Care
3. The beneficiary must be the taxpayer or close family(not a third party like a bank).
4. The contract must not be speculative(e.g., pure investment policies are excluded unless they include real coverage of life or disability).

I enter my life policies issued in the UK years ago, before Brexit, and which cover me throughout the EU and were issued whilst the UK was still in the EU. I principally have life insurance contracts with Legal and General and provide cover across the EU. The other alternative is to take out Italian equivalent policies especially for things like health insurance. It’s worth getting a quote from one of the bigger insurance providers such as Generali (or Genertel, their online offering) Allianz, Zurich, Groupama, Unipol Sai, Banca Intesa, Reale etc

Other categories include:

Donations (19-30%)
donations to recognised NGO’s, religious institutions or universities.

Mortgage interest (19%)
You can deduct interest on mortgages for your first home (prima casa) up to a cap of €4,000 per year.

Education expenses (19%)

• Kindergarten through university tuition (both public and private, up to limits)
• School meals and after-school program
• University housing (if located outside the student’s home province)

Max annual deduction for private schools may vary by level and region, with a cap around €800 per child.

Rental deductions

If you rent your main home, you may claim a tax credit based on your income and contract type.

For example: Ordinary rental contracts (contratto 4+4), Student housing and transfers for work (if you’ve moved for employment reasons)

The credit varies depending on income, age, and contract type (e.g., up to €495.80 or more).

Family related deductions and credits

Dependent children and other family members, alimony and maintenance payments (deductible), Nursery/kindergarten costs (detraction up to €632 per child)

Disabled persons (LEGGE 104/1992 BENEFITS)
Special deductions and detractions for people with disabilities or their caregivers, including: 19% for adapted vehicles (with limits), full deduction of medical devices, assistance costs, etc.

Sport and Youth activities (19%)

Up to €210 per child under 18 for gym, swimming, dance classes, etc. Applies to recognized sports facilities and clubs.