Where to Take Advantage of Italy’s New Tax Breaks

As if great wine, delicious food, picture-perfect towns brimming with history, and stunning beaches were not enough to make you want to move to Italy, now a low tax rate has been added to make the country even more irresistible. Earlier this year, the Italian government approved a new tax incentive for retired foreigners. Now, you can pay only 7% flat tax on foreign income.

The flat tax applies to any foreigner who receives a pension from a country that has a tax treaty agreement with Italy (such as Tax Information Exchange Agreements, or TEIAs) and has resided outside of Italy for the previous five years. The new law has some exemptions and is still being tested, so you will need a good tax consultant by your side to navigate its application, but the advantages of the tax break known as the “Foreign Pensioners’ regime” are tempting. The flat-rate tax incentive is available for up to six years. After that, you revert to standard Italian tax ranging from 23% to 43%, depending on your income.

One of the conditions of the new flat tax regime is that you have to move to a town with a population of less than 20,000 inhabitants in the southern regions of Abruzzo, Basilicata, Calabria, Campania, Molise, Puglia, Sicily, or Sardinia.

Cost of living in those areas is low, as long-term rentals are affordable and your weekly groceries won’t break the bank. You can buy a coffee for 80 cents, a glass of wine for just over $1, and enjoy a full meal in a traditional restaurant for less than $20. Small towns are everywhere in southern Italy. I’ve chosen four of my favorites.

Polignano a Mare, Puglia

Perched on a high limestone cliff, the whitewashed buildings of Polignano a Mare overlook the Adriatic Sea. Winters are mild and short here, the panoramic sea vistas are breathtaking, and the food is typically Mediterranean: plenty of fruit, vegetables, olive oil, delicious pasta dishes, and fish, all fresh and seasonal.

The town has shops, restaurants, several museums, and a library. A train station in the town and an international airport 20 minutes’ drive away in Bari means that you are only a hop away from major national and European destinations.

Vicki Comisso and her husband, David Boyle, have been living between Austin, Texas, and Monopoli, Puglia, for the past few years. They like Polignano a Mare and are considering settling down there under the new Italian tax regime.

“The sea, the air quality, the locally sourced fish, and the quality of life are just wonderful. We live very well on our retirement income in Puglia. We pay $1,300 a month, including all the utilities, for a beautiful 1,000-square-foot, two-bedroom apartment with a terrace and sea views.” Vicki says food in Puglia is cheaper than in the U.S. and that they can shop daily for fresh produce and fish when in Italy.

“Puglia is a good place to have a nice retirement. We are always busy, and there is never a boring day. We ride bikes, travel, entertain friends in our house, and go to concerts or to the opera house in Bari.”

Properties in the old part of Polignano a Mare tend to be small but with a lot of character. One such is a 750-square-foot house just a short stroll from the town’s beaches. Priced at $185,000, it has two bedrooms, two bathrooms, a small kitchen, dining room, and a rooftop terrace with sea views. Further inland, there are many affordable options for sale. Like a two-bedroom, 1,000-square-foot stand-alone villa with an olive grove, five minutes’ drive from the town center, with a price tag of $101,000 (see: Immobiliare.it). Rental prices vary from $560 to $1,120 depending on the distance from the beach.

Guardiagrele, Abruzzo

With a small population of about 9,000 people, the historic town of Guardiagrele oozes character. “It is a lively town, says Lauren Newcomer, who together with her husband, Kurt, bought a house in Guardiagrele. They go to there three or four times a year and stay for a month each time. “Every evening folks turn out for the passeggiata stroll before heading home for supper. We love the people of our town. They have warmly welcomed us into their community, despite our minimal Italian.”

Often called “the terrace of Abruzzo,” the historic hilltop town retains its medieval character, punctuated with fortified walls, noble palaces, and towers.

Despite the small size, Guardiagrele has everything for comfortable living. Eateries range from simple pizzerias where you can grab a slice for less than $2 to a Michelin-star restaurant. “Every Sunday morning, the whole town comes out to the market on the main square. There are shops of all types in the center of town, bakeries with fresh bread and pastries, butcher shops, cheese, fish, and gourmet food shops line the narrow streets,” says Lauren. “The area around Guardiagrele is renowned for its wines, so we are spoiled for choice, with many wineries where we can sample the great wines of Abruzzo,” she adds.

Guardiagrele is well positioned. The bigger cities of Pescara and Chieti, with hospitals, train stations, and bus hubs, and an international airport, are within a 30-minute drive. The Adriatic coast with its beautiful beaches and excellent seafood restaurants is less than 40 minutes away.

A fixer-upper in town can be yours for $19,000.

When Lauren and Kurt stay in Abruzzo, they spend significantly less than back home. “The cost of living is much lower than in the U.S. Property prices and real estate taxes are very low in comparison. The local craftsmanship is excellent and there are many contractors available who speak fluent English,” says Lauren.

Lauren and Kurt paid $50,000 in 2010 for their 860-square-foot house, which needed renovation. “It is in the ancient walled part of the town. From our rooftop terrace we can see all the way to the sea and, on the other side, the mountains as well as the local old church of San Francesco.”

Plenty of properties are still available. A spacious, ready-to-move-in, 1,400-square-foot apartment a short stroll from the historic center of Guardiagrele is priced at $90,000. It has three bedrooms, a cozy kitchen with a fireplace, and two balconies with spectacular views over the mountains (see: Immobiliare.it). For $39,000, renovation enthusiasts can snap up a 1,600-square-foot fixer-upper house with vaulted ceiling, arched doorways, and the original stone floor tiles that can be reused. (Idealista.it)

Riposto, Sicily

Sitting on the splendid Ionian coast overlooked by Mount Etna, the town of Riposto is home to about 15,000 inhabitants. Despite its beautiful beaches, rows of shiny yachts, and abundant sunshine, the town is not overrun by mass tourism and retains its traditional charm.

Benjamin North Spencer, who moved to Riposto from California in 2012, loves the slow-paced life in the town and appreciates the simple pleasures of Sicilian living. Benjamin and his wife, Nadine, rent a spacious three-bedroom villa surrounded by citrus and palm trees, a stroll from the beach, for $1,150 a month. “You can find a simple apartment for $560 a month, but there are also places that lease for thousands of dollars,” says Benjamin. “Buying property is a good idea; prices are on the rise, and it is sure to continue scaling.”

A 970-square-foot, two-bedroom seafront apartment is on the market in Riposto for $163,000. Another option is a spacious two-bedroom apartment with panoramic views of Mount Etna and large terrace for sale for $110,000 (both Casa. it). Riposto has good roads, nearby highways, and is easily accessible by train or bus. Catania Airport operates national and international flights.

“Riposto has a 24-hour clinic, and there are hospitals in Giarre, Cannizzaro, and Catania, all within a 30-minute drive,” says Benjamin. “Most of the shops in town cater to daily living. The big and small streets in town are marked with fish and farmers’ markets, cafés and restaurants, wine and bread shops, butchers. There are pharmacies and vegetable stands, laundries, as well as ceramic shops, specialty chocolatiers, and jewelers.

“Our monthly living expenses are roughly half of what they were in California,” says Benjamin. “Rent and amenities fluctuate with your needs. We live simply, but we also like to be comfortable.”

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