Italy’s 7% Tax Regime Expands: The New Towns Now in Play

Anna: Welcome back to the Magic Towns Italy podcast! I'm Anna.

Luca: Yes you are. And I am Luca. Hi Anna.

Anna: Hi. Hope everyone had a nice Easter break and you didn't miss our podcast too much last weekend. So, today we are back with big news for anyone looking at retiring in Italy. It's a legal change that sounds tiny on paper, but is actually quite a big deal.

Luca: Yes, indeed. This is a classic Italian story with a few words getting changed in the law, and that ends up changing the map in a very meaningful way.

Anna: Yeah. In this case, the change affects the so-called 7% pensioner tax regime , which a lot of our readers and listeners already know about. I mean, we wrote plenty of articles about it.

Luca: Yeah. And we've done [00:01:00] so many podcasts about it. But this is possibly the biggest change in the scheme since it was launched about 10 years ago. What has changed is not the tax rate itself and not the basic logic that's underlying the tax regime, but it's a type of town that you can choose.

Anna: Which in practice may matter even more.

Luca: Absolutely.

Anna: Okay, so let's start with the simple version. What happened?

Luca: The simple version is this.

The law has raised the population threshold in the 7% tax scheme legislation from 20,000 inhabitants to 30,000 inhabitants. That means that the 7% regime can now apply in quite a few more towns than before, as long as the town is in the regions that were already covered by the law. And this is applicable as of last Monday, which is the 7th of April, 2026.

What has happened is that the menu, if you will, of the [00:02:00] eligible towns has broadened, and that makes it very interesting for people that are trying to pick which town to move to.

Anna: Because obviously a lot of the eligible places were, I mean, very small.

Luca: Tiny? Yes.

And that was the main complaint that we would get from our readers and listeners that qualifying towns often were beautiful, charming, somewhat cheap, but many prospective movers would look at the list and be like, oh, that looks good, but it is way too small for me.

Anna: And small meaning what? Like

Luca: Well, we've talked a lot about demographic resilience. We did a podcast a couple weeks ago. Towns dying out. And normally smaller towns mean fewer services, fewer shops that are open year round, fewer transportation links, fewer healthcare options, and also a quite a bit of isolation more than people can take.

Anna: Okay, so the reform moves the regime into a more practical sweet spot.

Luca: Yeah, that's what [00:03:00] I would say. The list of towns now includes a whole band of towns that still feel local and "Italian", but they are more livable on an everyday basis because they are simply bigger.

Anna: So, before we get carried away. Let's also be clear about what has not changed.

Luca: Yes, that's important, and these are the basic rules that underlie the 7% tax regime. It does not mean that the regime now applies everywhere in Italy. While the whole of Italy included, the North has plenty of towns that will benefit from such a tax break, the geography is still limited to the territories that were originally in the law.

What does this mean? It means that qualifying municipalities in Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise, and Puglia, plus very few earthquake [00:04:00] affected municipalities in Central Italy qualify. Outside of these regions, nothing qualifies. No matter how big or how small. The town doesn't qualify.

Second, it is still a tax break for people that have a qualifying foreign source pension income. It doesn't matter what kind of pension it is: private, public, state. Irrelevant. If you receive a foreign pension, you can qualify for this.

You transfer your tax residence to one of the qualifying towns in Southern Italy. And you're good. So this is not a general expat regime. It is not for digital nomads, and it is something aimed at foreign retirees.

Anna: We were really surprised because some of these towns are actually quite popular, I would say.

Luca: Yes, well known, and that's the fun part of this.

Anna: Okay, so let's talk through a few of the towns that now qualify.

Luca: Absolutely.

Anna: Let's begin in Abruzzo with Francavilla al Mare.

Luca: Yes. [00:05:00] We picked this one as the first out of the 80 new qualifying towns. It is a very good example. Francavilla al Mare is the kind of town that people makes think: "Okay, well I can see me moving here". It's on the Adriatic coast, just south of Pescara. So you have the sea. You have very nice promenade. It has this easy beach town rhythm, but it is not cut off from the wider world.

Anna: And that is important, isn't it?

Luca: Yes. It's a place where 7% town doesn't mean you are isolated in the corner of somewhere. You are close to a bigger urban area, close to an airport, Pescara Airport. And you can, I think in many cases, imagine to have a very pleasant day-to-day life in a place like this.

Anna: The next town is Sulmona, which already has a quite a profile among foreign buyers and expats.

Luca: It does. Sulmona is often mentioned by people moving to Abruzzo. It was quite attractive. It has a decently sized expat community. It's an elegant city [00:06:00] with the mountains, historic, and then it has that kind of Abruzzo mix of beauty, elegance and value, and it is one of the few mountain towns in Abruzzo with a significant population.

Anna: Absolutely. Like it really feels, um, like real, like it feels like a proper town. And what about Pompeii?

Luca: One of my favorites. Now, everyone knows Pompeii: huge cultural weight, UNESCO World Heritage side, but when you think about actually living in modern Pompeii, that is a different question.

Anna: Why?

Luca: Well, it isn't just archeology. It is certainly a place with a global cultural cachet. Tourism has a huge impact. You're gonna find holds of tourists at peak times, but it is also a large-ish town, around 25,000 people. It has a real infrastructure, supermarkets, there's something going on all year. It has transport services. The ancient side of course, is one of the great historical landscapes in the world, [00:07:00] but for relocation, you're thinking more about the modern town, and that is of course a more realistic option now that the tax regime has expanded.

Anna: So for some people, this incentive turns Pompeii from " lovely to visit" into possibly feasible to live in.

Luca: Maybe. I've been to Pompeii many times, it wouldn’t be my first choice to move to, with the tourism impact, I mean, but there is a proximity to Naples, Salerno, the natural setting is very attractive, so certainly worth looking at.

Anna: Now from Campania to Puglia: Putignano!

Luca: Putignano! Putignano is a good example of another great pick that's given to us by the tax reform because it has personality. It's not just pretty, you know, it has a town energy. It has a famous carnival, which gives it a cultural difference from a lot of the mid-size towns in the [00:08:00] list.

Anna: Yeah. And that matters if you want to live there long-term. In fact, many readers said that they get tired of the lack of life in some of the current 7% towns. So they end up, you know, craving atmosphere, energy, rhythm, texture.

Luca: Yeah. Oh, texture. Yes, I would say so. Putignano is a good example in that it has local life that is strong. It is certainly not on the tourist or the expat radar, but you know, it has an energy of its own.

Anna: To finish this off, let's go to Sicily and Noto.

Luca: Noto we kept for last because it's the one that will make listeners ears prick up. I wrote in our article on the website that I could almost hear the cheers from home if people found out that Noto was on the list.

Noto is one of the glamour names in this conversation, and retirees have wanted it on the 7% list for a long time. I talked to people that were [00:09:00] disappointed that some of the more remote, hamlets that are part of Noto do not qualify. Now they do. The town has a lot of symbolic weight. Another UNESCO World Heritage Site, it has a huge baroque pedigree and it is in this Modica, Ragusa, general area of southeastern Sicily. And it has that kind of look, that's iconic. The stoves, the streets, it has a very distinctive architecture. So we welcome it to the expanded list of 7% towns.

Anna: Yeah, absolutely. The location is great.

Luca: It is already not obscure, but it is on people's mental shortlist for Sicily. But now it's going to attract, I imagine far greater retention, which is important both for people that want to move there and this being almost more so for investors.

Anna: And probably a lot of listeners are visiting our Noto expat town guide.

Luca: I really hope so. There is one, so please go to the website and read it.

Anna: Okay. [00:10:00] So, to summarize: this reform opens up the 7% regime to 80 larger towns in Southern Italy, many of which have both charm and workable  infrastructure.

Luca: That's right. And our whole project, at Magic Towns, is about helping people think beyond the usual big cities. And at the same time, we don't want to pretend that every tiny bit suits everyone. So this reform opens up an interesting list of middle ground towns, and I think a lot of good decisions will get made around these newly editable towns.

Anna: Which is also why we have updated our material around the new qualifying towns.

Luca: So we've already listed out all the newly added municipalities. Every one of them has a profile in the Town Explorer on Magic Towns. You can search for those towns by using the 7% tax button. And listeners, if you want to go from "that sounds interesting" to "what is daily life [00:11:00] actually like there?", now you know where to go to find that information.

Anna: Exactly. So, this episode is informational, so not personal tax advice.

Luca: Very much so. Legal change is real, but your own eligibility depends on your circumstances. So read up, get informed, and do not move house on the basis of a podcast episode alone.

Anna: Though do keep listening to the podcast.

Luca: Yes, I was gonna say that. We are very thankful to have such a engaged and interested audience. If you have any ideas, or requests for next episodes, please hit us up on Facebook, Instagram, website, and thank you so much for listening to us this week.

Anna: Thank you guys. See you next week!

Luca: See you next week! Bye bye.