Retiring in Europe in 2026: which countries tax pensions at 5%, 7% or 15%

Retirees from outside the EU weighing a move to Europe in 2026 face a clear trade-off: the countries offering the lowest tax on foreign pension income are rarely those with the strongest hospitals or the easiest language. Greece, Italy, Malta and Cyprus have written flat-tax regimes for foreign pension income into law, while Portugal and Spain compete instead on cost of living, climate and established foreign-resident communities.

Key facts

• Greece: 7% flat rate on foreign pension income for up to 15 years — the longest window available
• Italy: 7% flat rate for up to 10 years, limited to small southern municipalities
• Cyprus: optional 5% rate on foreign pension income above a set annual threshold
• Malta: 15% flat rate through the Malta Retirement Programme, subject to a minimum annual tax payment
• Portugal and Spain: no reduced rate on foreign pension income

Which countries offer flat tax on foreign pensions?

Greece applies its 7% rate to the full amount of foreign-sourced pension income, in place of the standard progressive brackets, for qualifying new tax residents. The benefit can run for up to 15 years, compared with a decade under the comparable Italian scheme.

Italy's 7% rate also runs for up to 10 years, but only for retirees who move their tax residence to qualifying small municipalities in regions including Sicily, Calabria, Puglia, Abruzzo, Molise, Sardinia and Campania, each under a population ceiling set in Italian tax law. Cyprus takes a different approach: retirees can elect a flat 5% rate on foreign pension income above a set annual threshold, and the choice is made each tax year. Malta's programme applies 15% to foreign-sourced pension income remitted to the islands, subject to a minimum annual tax payment.

What changed in Portugal?

Portugal's Non-Habitual Resident regime, which gave foreign retirees a decade of reduced taxation on pension income, closed to new applicants in 2024. Its replacement, IFICI, is narrower and aimed at qualified employment and professional activity in designated sectors rather than being a general pensioner break. Anyone planning a 2026 move on the assumption that the old pension treatment still applies could face a difference of thousands of euros a year.

Portugal's remaining appeal rests on cost, weather and infrastructure: living costs sit below most of Western Europe, particularly in the Alentejo and in cities such as Coimbra and Braga, and the public health system, the Serviço Nacional de Saúde, is open to legal residents. Spain likewise offers no reduced rate on foreign pension income and requires tax residents to declare worldwide income.

How do retirees get residency?

Portugal's D7 visa grants residency to non-EU retirees who document steady passive income such as pensions, rental receipts or investment returns, rather than a large capital outlay. Spain's non-lucrative visa follows a similar logic: proof of passive income, no working in Spain, and an application lodged at a Spanish consulate in the applicant's country of residence. The file generally includes evidence of recurring income, a private health insurance policy with full coverage in Spain, a medical certificate and a criminal record check.

In Greece, non-EU retirees generally enter through a residence permit for financially independent persons, which asks for documented recurring income and health coverage. Malta's programme requires applicants to hold or rent qualifying property in Malta or Gozo, meet the minimum tax threshold set by Maltese authorities, hold health insurance valid across the EU and satisfy residence requirements tied to time spent in the country.

What this means for travellers

• Confirm Spanish income thresholds and renewal terms with the consulate handling the case, as these are revised periodically
• Check any specific Italian town against the current population and location criteria before signing a purchase or lease
• Confirm Greek eligibility conditions with the Independent Authority for Public Revenue before relocating
• Compare the tax rate with language and healthcare: English is an official language in Malta, while daily life in rural Italy and Greece runs in Italian and Greek

Germany, France and Ireland offer no equivalent pension tax regimes and instead compete on healthcare depth and infrastructure. Bulgaria, Poland and Montenegro compete mainly on price, and Hungary and Estonia do not run the retiree-specific schemes they are often credited with. Retirees comparing options should also weigh costs within countries, since the gap between expensive cities and cheaper towns can be larger than the difference between neighbouring ones.