€1 Homes in Sicily and Italy’s 7% Tax Regime for Foreign Pensioners

€1 Homes in Sicily and Italy’s 7% Tax Regime for Foreign Pensioners: Moving to Naro in 2026

Updated: August 4, 2026

Dr. Massimo Cavallari – Italian Chartered Accountant with over 25 years of experience, registered with the Padua Association of Chartered Accountants under no. 932/A and Expert Contributor to Il Sole 24 Ore

Foreign pensioners considering a move to Italy may find a particularly attractive combination in Sicily: the possibility of purchasing a property in the historic town of Naro for the symbolic price of €1 and, subject to specific legal conditions, benefiting from a 7% substitute tax on qualifying foreign-source income.

The municipality of Naro, in the province of Agrigento, relaunched its municipal “€1 Homes” project in June 2026. The initiative aims to restore abandoned properties, regenerate the historic centre and attract new residents and investors. The Municipality is currently coordinating the collection and publication of eligible properties through its official procedures.

For foreign retirees, however, buying the property is only one part of the project. The most important financial decision may be determining whether the relocation qualifies for the special Italian tax regime under Article 24-ter of the Italian Income Tax Code.

Key answer: can a foreign pensioner pay only 7% tax in Sicily?

Potentially, yes.

A person receiving a pension from a foreign institution may elect to pay a 7% Italian substitute tax on qualifying foreign-source income after transferring tax residence to an eligible municipality in Southern Italy.

The regime applies to eligible municipalities with no more than 20,000 inhabitants in Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise and Puglia, as well as certain municipalities affected by earthquakes.

Naro is a small Sicilian municipality and may therefore meet the territorial and population requirements. Eligibility must nevertheless be checked by reference to the official population data applicable to the first year of the election and to the taxpayer’s personal circumstances.

The Italian Revenue Agency confirms that the 7% substitute tax is governed by Article 24-ter of Presidential Decree no. 917/1986 and applies to qualifying individuals receiving foreign pension income who transfer their tax residence to an eligible municipality.

Who may qualify for the 7% pensioner tax regime?

The regime is intended for individuals who:

receive pension income paid by a foreign entity;
transfer their effective tax residence to Italy;
move to an eligible municipality in Southern Italy;
have not been Italian tax residents during the required previous tax periods;
relocate from a country that has an administrative cooperation agreement with Italy;
correctly exercise the option in their Italian income tax return;
continue to satisfy the conditions required by Italian law.

The tax benefit is not granted automatically simply because a person buys a house in Sicily.

A €1 property purchase, municipal registration and Italian tax residence are legally distinct matters. The taxpayer must genuinely transfer the centre of personal and economic life to Italy and comply with the Italian rules on tax residence.

What income may be taxed at 7%?

The special tax is commonly described as a “7% tax on foreign pensions”, but its potential scope can be broader.

Subject to Article 24-ter and the applicable international tax treaties, the substitute tax may cover qualifying income produced outside Italy, including:

foreign pension income;
foreign investment income;
foreign dividends and interest;
foreign rental income;
certain foreign capital gains;
other foreign-source income falling within the statutory regime.

Italian-source income is generally excluded from the substitute regime and remains subject to ordinary Italian taxation.

This distinction is crucial. A pensioner who owns investments, rental properties, companies or bank accounts in more than one country should obtain an analysis of each income category before relocating.

Foreign government pensions require special attention

Not every foreign pension is treated in the same way.

Private-sector pensions and government or public-service pensions may be subject to different rules under the relevant double taxation agreement between Italy and the pensioner’s former country of residence.

For example, a tax treaty may reserve the right to tax certain government pensions to the country that pays them. Citizenship, former public employment and the precise nature of the pension can affect the result.

Before transferring residence, it is therefore necessary to examine:

the country paying the pension;
whether the pension is private, occupational or governmental;
the applicable double taxation agreement;
the taxpayer’s citizenship;
any withholding tax applied abroad;
other foreign income and investments.

A general online statement such as “all foreign pensions are taxed at 7%” may be attractive, but it is not sufficiently accurate. International taxation has a habit of hiding the important detail in paragraph 17.

How long does the 7% tax regime last?

The election can apply for the period provided by Article 24-ter, subject to continued compliance with the statutory conditions.

The taxpayer must correctly exercise the option and make the annual substitute tax payment. For 2026, the Italian Revenue Agency identifies tax code 1899 for the payment of the substitute tax applicable to foreign pensioners who become new Italian residents.

The tax regime should be planned before the move, not reconstructed after the taxpayer has already become resident.

Incorrect timing may affect:

the first eligible tax year;
the previous non-residence requirement;
foreign tax withholding;
registration with the municipality;
access to healthcare;
the filing of the first Italian tax return;
the reporting of foreign assets and income.

Why €1 homes in Naro may appeal to foreign retirees

Naro is located in the province of Agrigento in south-western Sicily. Known as “La Fulgentissima”, it has a historic centre characterised by churches, monasteries, noble buildings and the Chiaramonte Castle.

Its location offers access to several well-known Sicilian destinations:

the Valley of the Temples near Agrigento;
the Scala dei Turchi;
the beaches of the Agrigento and Licata coast;
historic towns and inland landscapes;
Comiso and Catania airports.

A property in Naro may be used, subject to planning, building and municipal regulations, as:

a principal residence;
a holiday home;
a property for family use;
tourist accommodation;
a bed and breakfast;
another hospitality or investment project.

The €1 initiative is open not only to Italian citizens but potentially also to foreign individuals and qualifying organisations, subject to the municipal procedure and the conditions attached to each property.

Does a €1 house really cost only €1?

No. The €1 price is symbolic.

A purchaser must normally budget for several additional expenses, which may include:

notary fees;
land registry and cadastral checks;
registration, mortgage and cadastral taxes;
technical surveys;
architect, engineer or surveyor fees;
structural works;
roof, façade and utility renovation;
building permits;
municipal charges;
insurance;
guarantees required by the municipal procedure;
legalisation and translation of foreign documents;
ongoing Italian property taxes and local charges.

Some buildings may require substantial renovation. Before submitting an offer, the buyer should commission a technical and legal due-diligence review.

A low acquisition price does not necessarily mean a low total investment. It may nevertheless create an attractive opportunity for purchasers who understand the restoration costs and wish to live in, or contribute to, a historic Sicilian community.

Can a non-EU citizen buy a €1 house in Italy?

Foreigners may be able to purchase Italian real estate, but the applicable conditions depend on nationality, residence status and the principle of reciprocity.

EU and EEA citizens generally face fewer restrictions. For non-EU citizens, the notary must verify whether the purchaser is entitled to acquire property under Italian law, an international agreement, a residence permit or the applicable reciprocity rules.

Buying property does not automatically grant the right to reside permanently in Italy.

A non-EU pensioner may also need to obtain an appropriate visa, often an elective residence visa, before establishing long-term residence. Immigration eligibility and tax eligibility must therefore be assessed separately but coordinated carefully.

What must be checked before moving to Naro?

A proper relocation plan should cover at least five areas.

1. Tax eligibility

The adviser should verify:

previous countries of tax residence;
the foreign pension provider;
the applicable tax treaty;
the municipality’s population requirement;
the starting year of Italian tax residence;
the taxpayer’s foreign assets and income;
whether the Article 24-ter election is beneficial.

2. Immigration and residence

Non-EU citizens may require a visa and residence permit. EU citizens must still complete the relevant Italian registration procedures when relocating permanently.

3. Property due diligence

The purchaser should verify ownership, cadastral conformity, planning compliance, structural condition, renovation obligations and any restrictions protecting the historic centre.

4. Banking and transfer of funds

The source of funds must be documented under Italian anti-money-laundering rules. Opening an Italian bank account and transferring the purchase and renovation funds should be planned in advance.

5. Post-relocation tax compliance

After becoming an Italian tax resident, the pensioner may need assistance with:

the annual Italian tax return;
exercise of the 7% option;
payment of the substitute tax;
treaty relief and foreign withholding taxes;
Italian-source income;
foreign accounts and investments;
inheritance and estate planning;
property taxes and local charges.

Why professional tax advice should come before the property purchase

The attractive feature of the Naro project is the opportunity to purchase and restore a historic property. The financially significant feature, however, may be the tax position created by the transfer of residence.

A relocation decision should not be based on the 7% headline alone.

Our analysis considers the taxpayer’s entire situation, including:

pension type and country of origin;
tax treaties;
investment and rental income;
foreign companies and shareholdings;
trusts, retirement accounts and insurance products;
spouse and family residence;
timing of the relocation;
Italian and foreign inheritance consequences;
reporting obligations in both countries.

A qualified Italian Chartered Accountant can coordinate the tax, administrative and property aspects of the relocation and identify potential problems before they become expensive.

How Studio Cavallari assists foreign pensioners moving to Italy

Studio Cavallari provides specialised assistance to foreign pensioners and international clients who intend to relocate to Italy.

Our services may include:

preliminary assessment of eligibility for the 7% regime;
analysis of the applicable double taxation treaty;
review of foreign pensions and investment income;
calculation of the potential Italian tax burden;
relocation timing and tax-residence planning;
application for an Italian tax identification number;
coordination with notaries, lawyers and local technicians;
assistance with Italian tax returns;
exercise and annual management of the Article 24-ter option;
assistance with foreign income, accounts and assets;
support after the purchase and relocation.

Our objective is not simply to submit a tax form. It is to help the client make an informed decision, prevent international tax errors and establish a sustainable new life in Italy.

A practical example

Consider a retired couple living abroad who receive:

a foreign private pension;
dividends from a foreign investment portfolio;
interest from foreign bank accounts;
rental income from a property outside Italy.

They are considering purchasing and renovating a property in Naro and becoming Italian tax residents.

Before moving, they should determine:

whether both spouses qualify independently;
which pensions are taxable in Italy under the relevant treaty;
whether the foreign investments fall within the 7% regime;
whether any income remains taxable abroad;
the correct year in which to transfer Italian tax residence;
whether foreign withholding taxes can be reduced or eliminated;
the reporting and tax treatment of Italian and foreign assets;
the total cost of purchasing and restoring the €1 property.

Only after this assessment can the couple compare the real tax savings with the cost and practical implications of relocation.

Official sources

Frequently asked questions

Can every foreign pensioner moving to Sicily pay 7% tax?

No. The pensioner must satisfy all the requirements of Article 24-ter, including the foreign pension, previous non-residence, eligible municipality and tax-residence conditions.

Does buying a €1 house automatically qualify me for the 7% tax regime?

No. Property ownership and tax residence are separate matters. The taxpayer must genuinely transfer tax residence to Italy and correctly exercise the statutory option.

Is the 7% tax calculated only on my pension?

The regime may apply to a broader range of qualifying foreign-source income. Italian-source income is generally taxed under the ordinary rules. Each category must be analysed separately.

Are government pensions always included?

No. Government and public-service pensions may be governed by special provisions in the applicable double taxation treaty.

Do I need to renovate the property?

Normally, yes. The municipal project is intended to recover abandoned or deteriorated properties, and the purchaser must comply with the applicable renovation obligations and deadlines.

Is the total property cost really €1?

No. The symbolic price does not include notary fees, taxes, technical services, permits, renovation costs, guarantees and ongoing ownership expenses.

Can a British, American, Canadian or Australian citizen buy a property in Naro?

Potentially yes, but the right to purchase, immigration status and reciprocity rules must be checked according to the purchaser’s nationality and personal circumstances.

Does buying a house give me an Italian visa?

No. The purchase of real estate does not automatically grant residency rights. Non-EU citizens must separately qualify for an appropriate Italian visa and residence permit.

When should I obtain tax advice?

Ideally, before transferring residence, purchasing the property or changing the taxation of the foreign pension. Correct timing can be decisive.

Can Studio Cavallari manage the Italian tax compliance after my move?

Yes. We assist with eligibility analysis, tax-residence planning, treaty review, annual tax returns and management of the 7% substitute-tax election.

Start your relocation to Sicily with a proper tax plan

A €1 home in Naro can be the beginning of an exciting personal or investment project. For a foreign pensioner, however, the property, immigration position and Italian tax residence must be planned together.

Studio Cavallari combines more than 25 years of professional experience with qualified assistance in Italian and international taxation. We help foreign clients understand whether the 7% regime applies, estimate the real tax benefit and avoid mistakes before relocating.

Telephone: +39 049 613584
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