Steve Smulders
Peace of mind for the wallet! That is what every Dutch person wants. This was evident once again from the rush on my Facebook post about the Italian 7% tax regime. Italy offers this low tax rate to foreign pensioners, on the condition that they live in one of the designated 2.600 municipalities with fewer than 30.000 inhabitants in the sparsely populated, aging, and economically weaker south of the country, including Sardinia and Sicily.
Dolce vita with your state pension, generous by Italian standards, which is also barely taxed. Yes! Or maybe not: do you actually want to live in such a small South Italian village?
Of course, you shouldn't just look at the financial side of things, but also assess whether you can really live comfortably somewhere. Are affordable and suitable homes available? Does the area have sufficient medical facilities, shops, bars, restaurants, and sports centers?
Is there a larger, lively city nearby? Is there an international airport within a maximum of one to two hours' drive? Is it safe there? Are there no earthquakes, no mafia problems, and does it not get too hot and dry in the summer?
These are all questions you must answer beforehand, before you take the step.
Popular Puglia
But if I tell you that many villages in popular Puglia fall under this tax scheme (including Alberobello) and that the same applies to many municipalities in Sardinia and Sicily, then it suddenly sounds a lot more attractive.
Just a few places to spark your imagination:
- Locorotondo in Puglia: a quiet hilltop town with whitewashed houses, a vibrant food culture, and numerous cultural festivals.
- Tempio Pausania in Sardinia: 13.000 inhabitants, granite landscapes, cool summers, and a jazz festival worth attending.
- Cefalù in Sicily: UNESCO cathedral, beach, and so picturesque that scenes from Montalbano were filmed there.
- Scalea in Calabria: 11.000 inhabitants, by the sea, with a train connection to Naples. Quiet and affordable.
- Venosa in Basilicata: 11.000 inhabitants, a Roman-medieval hilltop town known for its wines. It is also the birthplace of the poet Horace, for those who value that.
- Tricase in Salento, Puglia: 17.000 inhabitants and 5 minutes from incredible turquoise coves.
In my note on this tax scheme (which you can download here: https://stefsmulders.nl/Downloads/7procent_regeling_italie.pdf ) you will find, in addition to a detailed explanation, the complete list of participating municipalities, arranged by region and province.
Less favorable than it seems
Before you start dreaming of an Italian terrace by a beautiful bay, a word of caution is in order: however attractive a tax rate of 7% may sound, in some cases (for example, with a low income) the regime is less favorable than it seems.
After all, you lose the pension deduction of up to €1955. The 7% system works as a simple flat tax: you pay 7% on foreign income falling under the regime, and that is the end of it. Your tax assessment has never been so simple, and that is an advantage.
If you only receive the state pension, the tax benefit often remains limited. Precisely the most obvious dream scenario—a wealthy life in Italy with a small pension—turns out to remain a mirage.
An example: a couple both receiving state pension
As of January 1, 2026, a cohabiting state pension recipient receives €1.122,12 gross per month plus €76,10 holiday allowance per month: a total of €14.378,64 gross per year per person. For a couple moving to a 7% municipality with no other income, the joint gross income therefore amounts to €28.757.
| With the 7% rule | Joint income |
| State pension (gross per year) | € 28.757 |
| 7% tax | € 2.013 |
| Without 7% — standard IRPEF | |
| State pension (gross per year) | € 28.757 |
| IRPEF gross (23%) | € 6.614 |
| Pension deduction (-) | € 3.910 |
| IRPEF net | € 2.704 |
| Municipal/regional tax (~1,5%) | € 432 |
| Total Italian tax | € 3.135 |
In this scenario, the couple therefore pays €3.135 per year without the 7% ruling, and €2.013 per year with the ruling. The 7% ruling thus results in a saving of €1.122 per year. Modest in absolute terms, but over the 10 years of the regime, it amounts to well over €11.000. Not sufficient to justify a move for tax purposes in itself, but a real benefit that slightly increases net disposable income.
However, if you have other foreign sources of income that Italy is permitted to tax, the regime can actually turn out to be very advantageous. For example, if you have built up a substantial supplementary pension alongside your state pension, you are quickly in a very favorable position (except when it concerns a genuine ABP government pension. According to the tax treaty with Italy, the Netherlands is allowed to continue taxing this itself, unlike the state pension, even if you live in Italy. And so you pay the higher Dutch rate).
An example: a couple with a substantial company pension in addition to the state pension.
| Type of income | Amount/year | Tax 7% |
| State pension (both) | € 28.757 | € 2.013 |
| Company pension (each €17.500) | € 35.000 | € 2.450 |
| Total Italian levy | €5.974/year |
For the same income scenario, the IRPEF would amount to €16.908 per year. The benefit is therefore approximately 10.000 per year, or 100,000 over the 10 years of the regime.
In Summary
The 7% ruling offers pensioners from the Netherlands (and from other countries) the opportunity to live affordably in certain municipalities in Southern Italy. However, study the scheme thoroughly beforehand, do the math realistically, and first explore the region where you might want to live extensively.
A low tax rate can be attractive, but ultimately, the quality of your life determines whether Italy truly becomes your paradise.
The aforementioned note, including the accompanying calculation module, offers a good starting point for your exploration. With this, you can easily calculate your net income with and without the 7% ruling, based on your pension and other income.
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