Which Countries Tax Foreign Pensions Lightly?
Ezekiel had found an article about a flat 7% tax for foreign pensioners in Greece.
Picture a couple named Ezekiel and Henrietta, both 67, sitting with their daughter Mireille on a video call. Ezekiel had found an article about a flat 7% tax for foreign pensioners in Greece. He had printed it.
"Seven percent," he said. "Our pensions and the retirement account would cost almost nothing to tax."
Mireille, who does the family's paperwork, asked a plain question. "Does the United States stop taxing you when Greece takes its 7%?"
Henrietta said she thought not. They decided to look at several places side by side, and to write down how sure each fact was.
Mireille added a second question. "A flat 7%, a scale that starts at 9.5% and a rate that applies only above €5,000 are three different kinds of rule. How do we compare them?" Her answer was to take one example pension, US$40,000 a year (about €35,800), and work out the tax each rule gives wherever the notes allow it. A country whose full scale is not in the notes gets no figure, and it is not guessed.
| Country | Reported rule for a new retiree | Tax on a US$40,000 pension | How firm |
|---|---|---|---|
| Greece | 7% flat on foreign income for up to 15 years. Applicant must have a pension from abroad and move tax residence there. Deadline reported moved to 31 October; the year's tax is due by the last working day of December or the regime is lost | About US$2,800 | Reported by a news source, 28 September 2026 |
| Italy | 7% on foreign income in listed southern municipalities. The population cap was reported raised from 20,000 to 30,000 in 2026, and it is unclear whether it covers people registering in 2026. Duration reported as 9 or 10 years; we could not settle which | About US$2,800 | Reported by a tax website |
| Cyprus | 5% on foreign pension income above €5,000 (€3,420 before 2026) | About US$1,720 (5% of the amount above €5,000) | Reported by an accounting firm, 2026 |
| Portugal | Ordinary rates on worldwide pension: 12.5% up to €8,342, rising to 48% above €86,634. A solidarity surcharge also exists | Not in our notes: the brackets between those two are missing. The first €8,342 would carry about €1,040 | Portuguese tax code, 2026 |
| Spain | State scale from 9.5% to 24.5%, plus each region's own scale | Not in our notes: the full scale and a region's scale are missing | Spanish tax agency, 2025 |
| Panama | Tax only on income earned in Panama; a foreign pension sits outside it | US$0 | Reported, from tax code text on a non-official site |
| Costa Rica | Only Costa Rican income is taxed. Bills filed on 23 September 2026 would widen tax on some foreign income; they are not law; ask a paid professional whether pensions are covered | US$0 today | Reported, 2026 |
Mexico is missing from the table. The pension exemption in its law names Mexican schemes. How a foreign pension is treated is a question for the tax office, or a paid professional.
"These are very different," Henrietta said.
"The table shows what each country asks," Mireille said. "Three of the figures use one pension and the same exchange rate, so they can be set side by side. Two have no figure, so they cannot be ranked yet. I would like to know what the United States asks after that."
What the United States asks after
The United States taxes its citizens on worldwide income. Tax paid to a foreign country can be claimed as a credit, but the credit cannot exceed the US tax on that same income. So a very low local rate could leave a difference for the United States to collect. Panama has no tax treaty with the United States and no tax on the pension, so there is nothing to credit. How these pieces fit for one family is a question an accountant who works with Americans abroad could confirm.
The table therefore shows only the first of two bills. The United States bill on the same US$40,000 depends on filing status, deductions and the credit, none of which are in our notes, so we do not give a figure for it.
The rules also move. Greece changed its deadline this autumn. Italy changed a population cap this spring. A family that plans around a rate may want the paper in hand first. And a time limit changes the comparison: the Greek and Italian rates run for a set number of years, while an ordinary scale has no end.
You could…
- Ask the tax office of the country (or the consulate) which kinds of pension qualify, and whether the deadline has passed.
- Ask an accountant who works with Americans abroad to run one example with your own numbers, for both countries' bills.
- Look up a town's population before settling on it, since the Italian rule depends on it.
Which country did you check first, and what surprised you about the rule? Add it here; a reader weighing the same list may be helped by the date you found.
Figures are estimates for planning, based on public data. Rules change, so each figure shows the year it applies to; ask the official office before you act.
Sources: To Vima (28 September 2026), Taxing.it, Andersen Cyprus, CRN Contabilidade, Portugal's tax portal (Article 68 of the personal income tax code), the Spanish tax agency's 2025 manual, Mexico's income tax law, Panama's tax code, Delfino.cr, and the Internal Revenue Service list of tax treaties; European Central Bank reference rate, 7 October 2026 (US$1.1177 to the euro). Greece's tax authority site could not be opened, so Greek and Italian details rest on secondary sources.
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