Ostuni Joins Italy's 7% Flat Tax: What the 2026 Expansion Means for Retirees in Puglia

If you have been following Italy's 7% flat-tax conversation since 2019, the April 2026 expansion is the moment to pay attention. Law no. 34 of 11 March 2026 - the so-called Legge PMI - amended the regime through its Article 26 and, in force from 7 April 2026, raised the qualifying population threshold from 20,000 to 30,000 residents. That single change brings dozens of additional southern towns into scope. For Puglia specifically, it means three of the region's most internationally recognised towns - Ostuni, Conversano and Putignano - now qualify for the first time.

I'm Silvia. I'm Italian, I grew up in Puglia, and together with my husband Giampiero we founded Borgomadre - a small advisory that helps foreign families relocate, build and settle in Puglia, in partnership with my father's practice, Studio Pagliara. Half the families I sit across the table with are exploring the Italy 7% flat tax Puglia 2026 expansion before they buy a single square metre of land. That is the right order. Most articles online have not been updated since the law changed. This one has.

I will walk you through what actually changed, how the regime works in practice rather than in theory, which Puglia municipalities qualify today, where most foreigners get tripped up, and how we help families do it end-to-end. No marketing fluff. No vague promises. The path is real, but the details matter.

What the Italy 7% flat tax Puglia 2026 expansion actually changed

The regime itself - Article 24-ter of the Italian Income Tax Code (TUIR) - is not new. It was introduced in 2019 to help repopulate Italy's smaller southern towns. What changed in April 2026 is the eligibility map, and only the eligibility map.

The one substantive change. Article 26 of Law 34/2026 raised the population ceiling for qualifying municipalities in the eight southern regions (Abruzzo, Molise, Campania, Puglia, Basilicata, Calabria, Sicilia and Sardegna) from 20,000 to 30,000 residents. Towns whose registered resident population, as published by ISTAT, is at or below 30,000 now qualify. In Puglia, the headline new entrants are Ostuni (29,803 residents at the ISTAT estimate of 1 January 2026, just under the new ceiling), Conversano (around 26,000) and Putignano (around 27,000).

Everything else stays the same. The 7% rate is unchanged. The nine-year duration is unchanged. The option remains irrevocable for the full nine years. The five-year non-residency requirement still applies, and the regime still covers all foreign-source income, not only the pension. The April 2026 reform did not touch any of these mechanics - it simply widened the list of towns where you can live and claim it.

The reason this matters: until April 2026, a foreign retiree who wanted the Puglia experience - whitewashed centro storico, walkable old town, fifteen minutes from the Adriatic, an airport within forty-five minutes - had to look at towns like San Vito dei Normanni or Ceglie Messapica. Lovely places, but smaller than what most international buyers picture when they say "Puglia". Now Ostuni, the Citta Bianca itself, is on the list. That is a different conversation.

If you want the primary legal source, it is the official text in the Gazzetta Ufficiale: Law 34/2026, published 23 March 2026. Article 26 is the operative provision.

How the 7% regime actually works

The headline is simple: 7% flat tax on all foreign-source income - pensions, dividends, capital gains, rental income from foreign property, even interest - for nine consecutive tax years from the year you transfer your tax residency to a qualifying Italian municipality. That is not a typo. Seven per cent. Flat. For nearly a decade.

But there are five eligibility conditions, and missing any one of them disqualifies you:

1. You must not have been an Italian tax resident in the five tax years preceding the move. This is a hard rule. If you spent more than 183 days in Italy in any of the last five years, you may already have triggered Italian tax residency - talk to a tax adviser before you assume you qualify.

2. You must transfer your residency (residenza anagrafica) to a qualifying municipality - population at or below 30,000 in one of the eight southern regions. Not a second home: your registered primary residence with the comune.

3. You must receive at least one source of foreign pension income. This includes private and state pensions from your home country, and certain pension-equivalent annuities. UK SIPPs, US 401(k)/IRA distributions, Canadian RRIFs, Australian super pensions, Swiss AHV all generally qualify, but the categorisation must be confirmed in your first Italian tax return.

4. You must come from a country with a tax-information exchange agreement with Italy - effectively all OECD countries plus most others. The UK, US, Canada, Australia, Ireland, Switzerland and almost every EU member state qualify.

5. You declare your option in your first Italian tax return (Modello Redditi PF), filed the year after the move. The option is irrevocable for nine years; you can opt out, but doing so resets the five-year non-residency clock and you cannot re-enter the regime.

What the 7% covers: all foreign-source income. Pensions, dividends from non-Italian companies, capital gains on non-Italian assets, rental income from properties you keep abroad, interest from foreign bank accounts and bonds.

What it does not cover: Italian-source income. If you take a consulting contract with an Italian client, rent out a property in Italy or earn dividends from an Italian company, that income is taxed at ordinary Italian rates. The regime is not a free pass on everything - it is a flat tax on what you bring with you.

The myth that needs killing: the 7% does not require you to bring all your assets into Italy. You do not have to remit money. You do not have to close foreign bank accounts. You do not have to sell your home-country property. You simply declare the foreign income on your Italian return and pay 7% on it.

If you are trying to understand where this fits into the broader picture of buying or building in Puglia, our 7-step pillar on building a villa in Puglia as a foreigner covers the property side. The 7% flat tax is the fiscal lever; the property pathway is the physical one. Most of our clients use both.

The newly-eligible Puglia municipalities - and the ones already on the list

Here is the practical map for a foreign retiree as of April 2026, split into newly eligible after the 2026 expansion and already eligible before it, with a one-line read on each.

Newly eligible (post-April 2026)

• Ostuni (29,803 residents, ISTAT estimate at 1 January 2026). The Citta Bianca, the white city. Hilltop centro storico, sea views to the Adriatic, twenty-five minutes from Brindisi airport, sixty from Bari. Walkable, sophisticated, a strong restaurant scene, and now finally eligible. This is the biggest unlock - see our Ostuni vs Lecce vs Monopoli comparison for how it sits against the alternatives.

• Conversano (around 26,000). Inland from Polignano a Mare, thirty minutes from Bari. A stunning medieval centre, a castello, an emerging cultural calendar. Less coastal, but far quieter than Polignano in high season.

• Putignano (around 27,000). Best known for its February carnival, Italy's oldest. Inland, on the Murgia plateau, thirty minutes from Bari and forty from the Adriatic. Authentic and lower-priced than the coastal alternatives.

Already eligible before 2026 (still on the list)

• San Vito dei Normanni (around 19,000). Inland from Carovigno, twenty minutes from Brindisi airport. Where Borgomadre is based - we know it well. Quieter than Ostuni, with real working-town life around the piazza.

• Carovigno (around 16,000). Coastal access to the Torre Guaceto nature reserve. Small, charming, and significantly less expensive than its neighbours.

• Cisternino (around 11,000). The bell-tower town of the Valle d'Itria. Probably the prettiest of the trulli country, walkable, foodie-famous for its fornello pronto butchers.

• Locorotondo (around 14,000). Round-plan town in the Valle d'Itria, perched above vineyards. Genuinely one of the most beautiful villages in southern Italy.

• Ceglie Messapica (around 19,500). A recognised city of gastronomy - for a foodie retiree, hard to beat.

Towns explicitly not eligible

If you have been told otherwise, double-check. Fasano (around 38,000) and Martina Franca (around 46,000) are both above the 30,000 threshold and do not qualify. Lecce (around 95,000) and Bari (around 317,000) are far above. If a property agent points you at a masseria in Fasano and mentions the 7% flat tax in the same sentence, that is a red flag worth investigating.

Eligibility, application path, and the mistakes I see most often

Here is the actual sequence - what you do, in what order, and where it can go wrong.

Step 1 - Apply for a codice fiscale before you move. The sixteen-character Italian tax code. You can apply at any Italian consulate before relocating. Without it you cannot register residency, buy property, sign a utility contract, or file the option.

Step 2 - Transfer your residency (residenza anagrafica) to a qualifying municipality. This is done at the comune. You will need a stable address - a property you have bought, a long-term rental, or sometimes a verifiable letting from a friend or family member.

Step 3 - Spend the year correctly. To be considered an Italian tax resident, you need to be physically present in Italy for more than 183 days in a calendar year, or have your centre of vital interests there. The 7% regime requires you to be a tax resident from the year you elect into it.

Step 4 - File the option in your first Italian tax return, filed the year after the move. The option lasts nine years from the year you became resident, and it is irrevocable.

Step 5 - Maintain the eligibility. You must remain tax resident in a qualifying municipality. Moving to Milan in year five ends the regime. Moving from Ostuni to Cisternino is fine - both qualify.

The five mistakes I see most often:

1. Relocating before checking municipality eligibility. Do not assume - verify against the published list. Fasano is the trap I see most.

2. Not realising you must declare worldwide foreign income at 7%. The regime is a flat tax on everything foreign, not a cherry-pick. You cannot keep some dividends off the Italian return.

3. Triggering tax residency the year before you formally elect. If you spent 200 days in Italy in year zero, you may already owe ordinary Italian tax on that year. We have untangled this for clients more than once.

4. Not budgeting for the wider package. Italian tax residency brings social-security implications, healthcare enrolment (SSN), and inheritance-tax exposure. The 7% is excellent, but it is one piece of a larger puzzle.

5. Opting out without understanding the lock. Once you opt out, you cannot re-enter the regime. The decision is essentially permanent.

How Borgomadre helps

We are not tax advisors. But we sit in the middle of this pathway every week, and we have built a small network around it that does what most foreign retirees need.

For families considering the Italy 7% flat tax Puglia 2026 expansion alongside a property purchase or build, we offer:

• Codice fiscale and consular liaison before you arrive.

• Municipality shortlisting, based on lifestyle fit, eligibility status and forward-looking infrastructure.

• Property scouting and feasibility - our Phase 1 engagement is a paid, structured first step that identifies viable parcels or properties, runs the planning checks, and gives you a build-or-buy cost envelope.

• Build supervision through Studio Pagliara, my father's licensed engineering and architecture practice - a full direzione lavori relationship with the comune and the Soprintendenza.

• Introduction to a vetted Italian tax adviser for the 7% election itself.

If the regime is the lever, the right municipality is the lock. Most clients book a thirty-minute call with me to talk through their pension structure, passport, timing and shortlist. Use the RE services page to send a short brief, or message me directly on WhatsApp.

If you are still weighing whether to buy or build once you are here, our build vs buy pillar covers the trade-offs in detail.

For building specifically near the coast, see building a villa near Torre Guaceto.

If you are buying rather than building, start with a Salva Casa check.

The Italy 7% flat tax Puglia 2026 expansion is not a marketing event. It is a real, legislated unlock that opens three of Puglia's most attractive towns to international retirees for the first time. The window will not stay this advantageous forever. If the move is on your horizon, the next six to twelve months are the right ones to plan it properly.

F.A.Q.

1. What is the Italy 7% flat tax and who qualifies after the 2026 expansion?

The 7% flat tax (Article 24-ter of the TUIR) is a flat Italian tax on all foreign-source income for foreign pensioners who transfer their residency to a qualifying southern Italian municipality. After Law 34/2026 (in force 7 April 2026), the population threshold rose from 20,000 to 30,000, bringing dozens of additional southern towns into scope - including Ostuni, Conversano and Putignano in Puglia. You qualify if you were not an Italian tax resident in the prior five years, receive at least one foreign pension, and come from a country with a tax-information exchange agreement with Italy.

2. Which Puglia towns now qualify for the 7% flat tax in 2026?

After the April 2026 expansion, Ostuni, Conversano and Putignano are newly eligible. Already-eligible Puglia towns include San Vito dei Normanni, Carovigno, Cisternino, Locorotondo and Ceglie Messapica. Fasano, Martina Franca, Lecce and Bari remain above the 30,000-resident threshold and do not qualify.

3. How long does the 7% regime last, and is it really only 7% on everything?

The regime lasts nine consecutive tax years from the year you become resident in a qualifying municipality. During that period, 7% applies to all foreign-source income - pensions, dividends, capital gains, foreign rental income and interest. Italian-source income is taxed at ordinary rates. The option is irrevocable for the full nine years.

4. Do I need to bring all my money or assets to Italy to qualify?

No. The 7% regime does not require remittance. You can keep your foreign bank accounts, your home-country property and your investment portfolio abroad - you simply declare the foreign income on your Italian tax return and pay 7% on it.

5. How do I apply for the 7% flat tax?

You apply for an Italian codice fiscale, transfer your residency to a qualifying municipality, become tax resident for the year (typically by spending more than 183 days in Italy), and elect into the regime in your first Italian tax return (Modello Redditi PF) filed the year after. The option lasts nine years from the year you became resident.

6. Can I lose my eligibility once I am in the regime?

Yes. If you move your residency to a non-qualifying municipality - above 30,000 residents, or outside the eight qualifying southern regions - you exit the regime. You can move between qualifying towns freely. Opting out voluntarily is irrevocable: you cannot re-enter.

7. Does Borgomadre handle the tax filing itself?

We do not file Italian tax returns - that is a regulated activity reserved for commercialisti. We coordinate with a vetted Italian tax adviser as part of our Phase 1 engagement, and we handle everything around it: the codice fiscale, the municipality choice, the property side, and the build relationship through Studio Pagliara.