Italy and a US Annuity: What You Pay, What Is Settled and What Is Not

Written by Hans Goldstein, EA, licensed insurance agent · CA 4273294
Admitted to practice before the IRS
Updated October 2026

Italy is a popular pick for annuity buyers because the elective residence visa asks for passive income and names annuities. This page is the tax half: what Italy does with the check once you live there, and what is still open. I checked what I could against the statute text, the Italian tax agency (Agenzia delle Entrate, AdE) and the treaty. Where I could not, I say so and give no number. The visa side is on my Italy elective residence visa page.

The treaty: Italy taxes first, the US credits

Article 18(2) says annuities derived by a resident of one country are taxable only in that country, and it defines annuities as a stated sum paid periodically "during life or during a specified number of years" for adequate consideration (US-Italy treaty Art. 18(2), checked 18 Oct 2026). Life payments are named, so a life-only SPIA fits. The saving clause lets the US tax its citizens anyway. Article 23(4)(b) then fixes the overlap: for a US citizen living in Italy, income the US taxes by reason of citizenship is treated as arising in Italy "to the extent necessary to avoid double taxation", so the US foreign tax credit can absorb Italian tax; the same paragraph adds that the US tax can never be less than what a non-citizen would owe, which is nothing on an annuity the treaty gives only to Italy (US-Italy treaty Art. 23(4)(b), checked 18 Oct 2026). Italy gives its own credit for US tax only up to what the US could charge a non-citizen (Art. 23(3)), which is zero here. The result is the same as in the other modern treaties: about the higher of the two taxes, not the sum.

How Italy taxes the payments from a life-only SPIA

Here is what I could verify in the statute (the 1986 income tax code, TUIR). Article 50(1)(h) puts "life annuities and fixed-term annuities set up for consideration, other than those with a pension function" in the employment-assimilated category. It then defines the pension-function ones as annuities from life contracts with insurers authorized by the Italian insurance regulator to operate in Italy, whether by branch or by services, that do not allow surrender once payments begin (TUIR art. 50(1)(h), Normattiva, checked 18 Oct 2026). Only that favored group is taxed under the capital-income rule that reaches just the yield (TUIR art. 44(1)(g-quinquies), checked 18 Oct 2026).

A US insurer is not authorized in Italy, so on the plain words a US SPIA is outside the favored group. That points to art. 50(1)(h) income, added to your other income at the ordinary brackets. The tax agency read an annuity bought for consideration abroad that way in Risposta 841/2021: the payments join total income as assimilated employment income (AdE Risposta 841/2021, checked 18 Oct 2026). That case was an inheritance-waiver annuity, not an insurance contract, so it is a guide and not a ruling on your SPIA. For these annuities art. 52 switches off art. 48, the rules that determine ordinary employment income, and presumes the payments are received as the contract says (TUIR art. 52(1)(c), checked 18 Oct 2026). I found no provision that carves the premium share out of each check.

Some Italian advisers argue a foreign SPIA should be taxed on the yield only. I found no ruling or statute that says so for a non-Italian insurer, so I treat it as an open point and base the example below on the stricter reading. If a local adviser confirms yield-only, the Italian tax falls a lot; if not, it is the number in the table.

The rates: national tax is 23% up to €28,000, 33% from €28,001 to €50,000 and 43% above; regional tax is generally 1.23% to 3.33% and municipal tax 0% to 0.9% (PwC Tax Summaries Italy, reviewed 23 Jul 2026, checked 18 Oct 2026).

One timing warning. Normattiva shows art. 24-ter marked as repealed by Legislative Decree 117 of 19 June 2026 from 1 January 2027 (Normattiva, checked 18 Oct 2026); a commercial summary I read says the whole 1986 code (arts. 1 to 191) goes the same day. I did not verify the new article numbers or whether the substance stays the same, so the article numbers on this page are for 2026 and your adviser should check the 2027 text.

Deferred annuities, DIAs and MYGAs

A DIA is the same as a SPIA once payments start: the same rules apply to each check. Before the first payment there is no annuity income, but wealth-tax and reporting questions can already apply to the contract. In Italy the unsettled classification above applies to each DIA check as well. A MYGA or other deferred annuity is different while it accumulates: art. 44(1)(g-quater) taxes "the income included in capital sums paid under life insurance and capitalization contracts" (TUIR art. 44(1)(g-quater), checked 18 Oct 2026), which points to tax when money is paid out, not each year as it accrues. I did not verify the rate, or whether a US MYGA is classed as a life contract or something else, so I give no number for MYGA gains. Taking the lump sum instead of annuitizing is a separate Italian tax event from the check stream; ask before you choose.

The 7% regime and the flat tax for new residents

Article 24-ter lets a person with pension income of art. 49(2)(a) paid by a foreign payer elect a 7% substitute tax on all foreign income, for the year of the move and the next nine. Conditions in the text: not Italian tax resident in the previous five tax years, moving from a country with an administrative cooperation agreement, and moving to a town in Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise or Puglia (or listed earthquake-area towns) with no more than 30,000 inhabitants. The 30,000 limit replaced 20,000 in the text in force from 7 April 2026 (TUIR art. 24-ter, Normattiva, checked 18 Oct 2026).

The catch for an annuity buyer is the word pension. Article 49(2)(a) means "pensions of every kind and equivalent allowances" (TUIR art. 49(2)(a), checked 18 Oct 2026). In Risposta 246/2023 the tax agency told a person with a voluntary life policy paying a lifelong annuity, with no pension purpose and no retirement-age condition, that it was not pension income and the 7% regime was not open to them (AdE Risposta 246/2023, checked 18 Oct 2026). The same ruling repeats the agency's view that supplementary pension benefits paid by a foreign insurer or fund, in capital or annuity form, are pension income. So a pension-plan annuity may qualify and a plain purchased SPIA likely does not. A US annuity funded from an IRA or employer plan is a different animal; ask the adviser.

The other regime, art. 24-bis, charges a flat €300,000 a year on foreign income for a person moving in 2026, and €50,000 for each family member (TUIR art. 24-bis, Normattiva, checked 18 Oct 2026). On a $35,000 annuity that costs far more than it saves, so I would not look at it unless the foreign income is in the millions.

Wealth tax and exit tax

Italy has no general net wealth tax, but residents pay IVAFE, 0.2% a year on the value of foreign financial assets at 31 December (PwC Tax Summaries Italy, other taxes, checked 18 Oct 2026). The AdE lists life insurance and capitalization policies written by foreign insurers among the assets IVAFE covers (AdE Circolare 28/E of 2012, section 2.2, checked 18 Oct 2026). What I could not verify is the base for a life annuity that is already paying and cannot be surrendered. If the base were the $500,000 premium, the tax would be $1,000 a year; if it is a far lower figure, so is the tax. I give that $1,000 only as an upper illustration, not a ruling. The flat tax under art. 24-bis replaces IVAFE if you elect it (PwC Tax Summaries Italy, checked 18 Oct 2026). The PwC residence page lists no exit tax for an individual leaving Italy (PwC Tax Summaries Italy: residence, checked 18 Oct 2026). US tax on a citizen stays regardless of where you live.

Return of premium and the refund feature

A refund feature cuts the check by about 5% in my model and pays a death benefit. Three questions follow, and only the first is answered. Succession tax: a spouse or child pays 4% on value above €1 million per heir; siblings 6% above €100,000; other relatives to the fourth degree 6%; anyone else 8% (PwC Tax Summaries Italy, other taxes, checked 18 Oct 2026). Whether the refund is in the estate at all: the original 1990 text of art. 12(1)(c) leaves out of the estate "the indemnities due to heirs in their own right under insurance taken out by the deceased" (D.Lgs. 346/1990 art. 12, Gazzetta Ufficiale, checked 18 Oct 2026). I did not confirm the current wording after the 2024 rewrite of that decree, or that it reaches a foreign insurer's refund, so I treat it as not settled. Whether Italy sees a refund as return of capital for the IVAFE base or the income tax: not settled. On the US side, the refund value reduces the investment in the contract under IRC 72(c)(2) (IRC 72(c)(2), checked 18 Oct 2026).

The dollar

The annuity pays US dollars; your bills are in euros. Over the 20 years to October 2026 the euro ranged from 0.62 to 1.04 per US dollar (low on 22 Apr 2008, high on 27 Sep 2022), and on 9 Oct 2026 it was 0.89 (Federal Reserve H.10 via FRED, series DEXUSEU, inverted, checked 18 Oct 2026). On a $35,000 check that is about €21,700 at 0.62, €31,150 at 0.89 and €36,400 at 1.04. I do not predict where it goes. A natural hedge is a home or other assets in euros that offset the dollar income, with the annuity as the income floor.

Worked example: $500,000 SPIA at 65

The US side is the same in every country. As a US citizen you still file a US return. For a non-qualified life-only annuity the IRS excludes the part of each check that is your own premium coming back: the exclusion ratio is your investment in the contract divided by the expected return (IRC 72(b)(1), checked 18 Oct 2026). The expected return is the yearly payment times the Table V multiple for your age, which is 20.0 at age 65 and 16.0 at age 70 (IRS Publication 939, Table V, checked 18 Oct 2026). The exclusion stops once you have recovered your premium, and after that every dollar is taxable (IRC 72(b)(2), checked 18 Oct 2026). If the contract has a refund feature, the value of the refund is subtracted first, which lowers the excluded share (IRC 72(c)(2), checked 18 Oct 2026).

Assumptions, all of them mine: a US citizen starts at 65 with a $500,000 non-qualified life-only SPIA. Illustrative payout 7.0%, so $35,000 a year (illustrative, not a quote). Expected return $35,000 times 20.0 = $700,000, so the exclusion ratio is $500,000 / $700,000 = 71.4%: $25,000 a year is excluded and $10,000 is taxable until the $500,000 is recovered, about year 20; after that the full $35,000 is taxable. US tax on the $10,000 gain share at an assumed 22% federal bracket is $2,200; the 2026 22% bracket for a single filer runs from $50,400 to $105,700 of taxable income (IRS Rev. Proc. 2025-32, Table 3, checked 18 Oct 2026). I use EUR 0.89 per US dollar, so the check is about €31,150. I assume no other income unless I say so, and no deductions.

Italy: €31,150 less nothing (I ignore personal tax credits, which I did not verify apply to this income) gives 23% of €28,000 = €6,440 plus 33% of €3,150 = €1,039.50, so €7,479.50 of national tax. I assume 2.0% for regional and municipal tax (the published range is 1.23% to 4.23% combined), €623, for €8,102.50 or $9,104 at 0.89. Italy is the binding tax.

Italy has no age-based share, so the 70-year-old line changes only the US column, and the credit leaves the total at the Italian figure. The same $35,000 is held flat for the comparison; a real payout at 70 would be higher. If a local adviser confirms the yield-only reading, replace the Italy column; I have no verified yield share to put there.

What changes with other products: a MYGA has no check stream until you annuitize, so the table above does not apply to it until then. A DIA behaves like the SPIA once it pays.

How to use this

I am a US-licensed insurance agent and an Enrolled Agent, admitted to practice before the IRS. I can only help with a US annuity while you still live in the US, and I do not give foreign tax advice. Before you buy, get a written view from a local adviser who has seen your actual contract, and keep it with your papers. The sources are listed below.

This is education, not tax advice. Rules change; every rate here carries its source and the date I checked it.

Frequently asked questions

Related reading

• Moving abroad on a fixed income: the hub
• Where a US annuity is tax-smart abroad
• How Europe taxes a US annuity
• Italy elective residence visa: the income requirement
• Countries with a wealth tax and whether an annuity helps
• Spain vs Portugal vs Italy for an annuity retiree
• Cyprus: US annuity tax for a retiree
• Germany: US annuity tax for a retiree
• Spain: US annuity tax for a retiree

Sources

• US-Italy income tax treaty, IRS text (Arts. 18, 22, 23)
• Normattiva: TUIR art. 50(1)(h) (rendite vitalizie onerose)
• Normattiva: TUIR art. 44(1)(g-quater), (g-quinquies)
• Normattiva: TUIR art. 49(2)(a) (pensioni di ogni genere)
• Normattiva: TUIR art. 52 (assimilated income, annuities)
• Normattiva: TUIR art. 24-ter (7% regime), text in force 7 Apr to 31 Dec 2026
• Normattiva: TUIR art. 24-bis (new-resident flat tax), text in force 2026
• Normattiva: TUIR art. 24-ter page, marked repealed by D.Lgs. 19 June 2026, n. 117 from 1 Jan 2027
• Agenzia delle Entrate, Risposta n. 246 of 8 March 2023 (copy of the ruling; listed on the AdE March 2023 index)
• Agenzia delle Entrate, Risposta n. 841/2021 (onerous rendita vitalizia under art. 50(1)(h))
• Agenzia delle Entrate, Circolare 28/E of 2 July 2012, section 2.2 (IVAFE scope)
• Gazzetta Ufficiale: D.Lgs. 346/1990, art. 12 (original 1990 text)
• PwC Tax Summaries Italy: taxes on personal income (reviewed 23 Jul 2026)
• PwC Tax Summaries Italy: other taxes (IVAFE, inheritance and gift tax; reviewed 23 Jul 2026)
• PwC Tax Summaries Italy: residence
• 26 U.S.C. 72 (annuities: exclusion ratio (b)(1) to (b)(3), refund feature (c)(2))
• IRS Publication 939 (12/2025), Table V, ordinary life annuities, one life
• IRS Rev. Proc. 2025-32 (2026 rate tables, Table 3, unmarried individuals; standard deduction)
• Federal Reserve H.10 via FRED: DEXUSEU (US dollars per euro; I invert to euros per dollar)