How Italy taxes a retirement plan

We model these and we know we do not get them exactly right. Where the size could be measured, it is stated.

• We assume a fund that reinvests its income is taxed only when you sell it, so we charge nothing on the dividends and interest it collects on the way. Our Italian source material says that in one place and the opposite in another, and we followed the first. If the other reading is right, the tax we show is short by 1,872 a year on a 300,000 portfolio and 9,360 on a 1.5 million one. It is the largest single gap in our Italian numbers.

  Your real tax is higher/up to €9,360 a year/anyone holding funds that reinvest their income in an Italian taxable account

• Many Italian towns charge their local income tax only above a floor. Milan exempts income up to 23,000 and Rome up to 14,000, both above the average Italian pension of 22,880. Our figure has no floor, so we charge the town tax on people who would pay none of it: 0.5 percent of your income, which is 114 a year on the average pension and up to 400 a year at the top of the range we cover.

  Your real tax is lower/up to €400 a year/anyone in a town that exempts low incomes, which on the one comune in evidence means anyone below 23,000

• We charge each region's income tax as one rate across the whole of your income. Three regions instead pick a rate by band and apply it to everything you have, which is a step rather than a slope. In Friuli Venezia Giulia and Lazio that means we show too little at higher incomes, by up to about 134 and 404 a year; in Valle d'Aosta, which exempts the first 15,000 outright, we show up to 184 a year too much.

  Could go either way/up to €307 a year/anyone in Friuli Venezia Giulia, Lazio or Valle d'Aosta, whose regions charge a step rather than a slope

• Most Italian regions charge their regional income tax in steps, at a higher rate on higher slices of income. We charge one rate for the whole of your income, chosen to keep the yearly error as small as possible across incomes from 15,000 to 80,000. In six regions that is exact, because those six really do charge one rate. Everywhere else it is close rather than exact: at worst about 267 a year out in Liguria, against as much as 1,122 a year before we asked where you live.

  Could go either way/up to €267 a year/anyone in one of the 15 Italian regions whose regional surcharge is banded

• We charge Italy's yearly stamp duty at 0.2 percent of everything in your investment account, which is the rule for investments and deposit accounts. Money on an ordinary current account or a postal savings book pays a flat 34.20 a year instead, and nothing when its average balance is 5,000 or less. Postal savings bonds are free of it up to 5,000. If part of what you entered sits on a current account, our figure can be off by a few tens of euros a year either way.

  Could go either way/up to €66 a year/anyone counting money on an ordinary current account, a postal savings book or postal savings bonds as part of their investment account

• Neither the regional nor the town income tax is due at all once your income tax falls to about 12 or below, or where everything you have is investment income taxed separately from your pension. Our flat local rate has no such cut-off, so a retiree who owes almost no income tax still pays a few euros of it here.

  Your real tax is lower/a retiree whose Italian income tax comes to almost nothing

• An Italian complementary pension fund pays 20 percent every year on what it earned, counting gains it has not sold, and carries a loss to later years. We charge that, but at 20 percent on everything: the part of the fund's result that comes from government bonds really pays 12.5 percent. With a fund that holds a lot of government bonds, the tax we show is a little too high.

  Your real tax is lower/anyone whose Italian complementary pension fund holds government bonds

• We model an Italian complementary pension fund's payout: the exit tax falling with your years of membership, the capital you take at the pension age (at most half, or all of a small pot), and the rest paid as a term annuity, free withdrawals or instalments over the years you choose. Some of it is simplified. Unless you choose another payout form, we pay the whole fund as capital at the pension age and leave any annuity to the pension you enter yourself, so a large fund with no annuity entered reaches you sooner than the law allows: it caps the capital at half. We treat all the money as paid in from 2007, we never take an advance or a surrender, a small pot is judged with the state scheme's conversion rate, and the instalments option starts from 2027.

  Could go either way/anyone with an Italian complementary pension fund, especially with money paid in before 2007

• Italy lets no loss on a fund reduce a gain on a fund, so loss relief on a portfolio of funds comes to nothing at all. We give no loss relief either, so on that we match. What we cannot follow is the way round it: someone holding traded commodity or structured products can set losses on those against gains on them, and for that person we show more tax than they would pay.

  Your real tax is lower/anyone holding traded commodity notes or structured certificates alongside funds

• We tax all of your rent. Italy taxes 95 percent of it, and lets you choose a flat rate instead, 21 percent on an ordinary residential let, which also switches off the regional and town taxes. We offer neither, so a landlord's tax here is too high. Rent taxed at the flat rate does still count when working out how much pension credit you keep, which takes back at most 6.44 percent of the rent.

  Your real tax is lower/anyone letting out Italian residential property

• A bond fund that holds partly government bonds gets Italy's lower 12.5 percent rate on that part only. We offer the two ends, a fund of all government bonds or an ordinary bond fund, so for a mixed fund pick the nearer one.

  Could go either way/holders of Italian-taxed bond funds that mix government and company bonds

• We tax an Italian couple as two separate people, as the law does, each on their own pension and their share of your savings. The credit for a dependent spouse, for a partner with almost no income, is not applied, so for such a couple we show more tax than you pay.

  Your real tax is lower/couples where one partner has much less income than the other

These exist in law and we leave them out, usually because applying them would need a question we do not ask.

• Hand your portfolio to a manager with discretion over it and Italy taxes it a different way: 26 percent every year on the whole gain including what you have not sold, after fees. It is the most expensive of the Italian arrangements and we do not model it. On a 300,000 portfolio it costs about 4,812 a year against the 2,690 we show. You cannot choose it on an ordinary brokerage account.

  Your real tax is higher/up to €2,122 a year/anyone whose portfolio is run under a discretionary management mandate

• Italy gives a pension fund annuity the larger tax credit meant for wages, not the smaller one for state pensions. We give every pension the state pension credit. If a fund annuity is your only pension, we show up to about 1,560 a year more tax than you pay.

  Your real tax is lower/up to €1,563 a year/anyone whose pension comes from an Italian pension fund or insurer annuity rather than from INPS

• A life annuity from an Italian complementary pension fund is not taxed like a state pension. The part paid for with contributions you deducted is taxed at a flat 15 percent, falling to 9 percent after 35 years of membership; the part already taxed inside the fund is free; and the investment return earned after the annuity starts is taxed at 26 percent. None of it counts toward your income tax bands. We cannot split an annuity this way yet, so if you enter one before tax we tax all of it as ordinary income, which shows far more tax than you pay.

  Your real tax is lower/up to €1,420 a year/anyone who enters an Italian pension fund annuity before tax

• Five Italian regions cut their own regional income tax with a credit, a deduction or an outright exemption, and we charge a plain rate with nowhere to put any of them. The two autonomous provinces are the ones it matters most in: Bolzano's credit of 430.50 and Trento's deduction of 30,000 wipe out the regional tax entirely for a typical pension, and we still charge it. We show up to about 517 a year too much in Bolzano and 404 in Trento.

  Could go either way/up to €517 a year/anyone in Bolzano, Trento, Umbria, Valle d'Aosta or Lazio, and most of all a pensioner in one of the two autonomous provinces, where the true regional tax is often zero

• Above 200,000 of income Italy cuts the total of your expense reliefs by a flat 440 a year, and we do not apply that cut, so at those incomes we can be showing up to 440 a year too little. For a retiree whose only relief is the pension credit it makes no difference, because that credit has already run out by 50,000.

  Your real tax is higher/up to €440 a year/anyone above 200,000 of income with expense reliefs to claim

• Italy's regional and town income taxes are set locally. We now ask which region you live in and charge that region's own rate. We do not ask which town, so the town half stays at one middle figure of 0.5 percent, and a household that skips the region question is still charged one middle rate of 2.2 percent. Town rates run from nothing to 0.9 percent, so on a 25,000 pension the town half alone is somewhere between 125 a year less than we charge and 100 a year more.

  Could go either way/up to €320 a year/anyone retiring in Italy, because every town sets its own rate and its own floor, and anyone who skips the region question

• Interest on a deposit account is taxed at 26 percent every year it is paid. We treat the cash part of your investments as a fund that reinvests its income, which is taxed only when you sell, so we charge nothing on that interest while you hold it. If your cash is on deposit we show too little tax, by about a quarter of the interest.

  Your real tax is higher/up to €130 a year/anyone keeping part of their savings on a deposit account

• There is an extra 50 a year of pension tax credit for anyone whose income sits between 25,000 and 29,000. Our credit tapers smoothly and has no room for a bump inside a band, so we leave it out and show up to 50 a year more tax than you would really pay.

  Your real tax is lower/up to €50 a year/anyone with an Italian income between 25,000 and 29,000

• The pension tax credit has a floor of 713 a year, there for someone who drew a pension for only part of the year and whose credit is scaled down by the days. We do not apply the floor. For a full year of pension the credit is already 1,955, well clear of it, so leaving it out changes nothing for anyone retired all year.

  Could go either way/someone who draws an Italian pension for only part of a year

• Italy caps the total relief you can claim for personal expenses once your income passes 75,000, with the cap scaled by the size of your family. We model none of those reliefs, so the cap has nothing here to bite on. If you have expenses that qualify, the tax we show is too high, and this cap would have taken part of that back.

  Your real tax is lower/anyone with personal expenses that qualify for Italian tax relief

• A fund that does not meet the European rules Italian tax law recognises, typically one based in the United States, escapes the flat 26 percent. What it pays you is added to your pension and taxed at your ordinary rates plus the local taxes, which reaches about 45.5 percent at the top. We charge 26 percent throughout. European rules now stop most retail investors buying these, so it is mostly an old holding.

  Your real tax is higher/anyone still holding a fund based in the United States or otherwise outside the European rules

• Buying Italian shares carries a transaction tax, doubled for 2026 to 0.4 percent away from an exchange and 0.2 percent on a regulated market, with companies worth under 500 million exempt. It is a cost of trading rather than a charge on holding, so we leave it out. Trade often and your real costs are higher than we show.

  Your real tax is higher/anyone buying Italian shares often

• Own a second home in the same town as the one you live in and leave it empty, and Italy adds half of its assessed rental value to your taxable income on top of the property tax. We do not model that, so your tax is understated. The home you live in is handled correctly: its assessed value goes in and an equal deduction takes it straight back out.

  Your real tax is higher/anyone with an empty second home in the same town as their main home

• Italy has two shelters we do not offer: a savings plan whose gains are free of tax if you hold it five years and keep it concentrated in smaller Italian companies, and life policies taxed at 26 percent only when you cash them in. Both would lower the tax we show. We could not confirm how much you are allowed to put into the savings plan, and neither is a mainstream retirement product.

  Your real tax is lower/anyone using an Italian tax-sheltered savings plan or an investment life policy

• A dividend from a foreign company is taxed abroad first, and Italy then charges its 26 percent on what is left, without giving credit for the foreign tax. Our Italian model assumes an accumulating fund that pays no dividends, so this second layer never appears.

  Your real tax is higher/people holding foreign shares directly and receiving their dividends

• Part of an older member's pension fund annuity, the part built up between 2001 and 2006, is taxed as ordinary income but only on what was not already taxed inside the fund or paid from money you never deducted. That share differs for every member, and we have no place to enter it, so we tax all of that part.

  Your real tax is lower/members of an Italian pension fund who joined before 2007 and take an annuity

• A life annuity you buy from an insurer with money already taxed, and cannot cash in once it pays, is taxed only on the investment return inside each payment, at 26 percent. The rest is your own money coming back. The insurer reports that return each year and we have no place to enter it, so if you enter the annuity before tax we tax all of it as ordinary income. Enter it after tax instead; the tax on the return is small.

  Your real tax is lower/anyone who enters a purchased Italian life annuity before tax

Separate tax systems, or rules that only bite outside a retirement plan.

• Italy charges a yearly tax on property and we do not model it. The home you live in is exempt. Anything beyond it costs roughly 0.3 to 0.5 percent of market value a year in practice, and property you own abroad carries its own charge of 1.06 percent. These are charges on bricks rather than on your portfolio, so they sit outside everything shown here.

  Your real tax is higher/anyone owning property beyond the home they live in, in Italy or abroad

• Someone who moves to Italy after five years living elsewhere, and settles in a southern town of fewer than 30,000 people, can pay a flat 7 percent on everything arriving from abroad, pension included, for ten years. We do not model it, so if that is your plan every figure here is far too high. Nobody who spent their working life in Italy can qualify.

  Your real tax is lower/someone moving to Italy from abroad and settling in a small southern town

• Crypto gets its own Italian rate from 2026: 33 percent above a 2,000 exemption, and 26 percent for the coins pegged to the euro. We do not model it as a holding at all. If you counted crypto in the portfolio you entered, we have taxed it like everything else at 26 percent, which is too little.

  Your real tax is higher/anyone counting crypto in the portfolio they entered