Most people know the Vatican is a sovereign city-state inside Italy.
But almost nobody knows about the other one. I too paid very little attention to it myself until recently.
The country is San Marino.
(did you guess it?)
It’s the oldest republic in the world, 34,000 people, geographically inside Italy but with its own government, its own laws, its own tax code, and only 20 minutes from Rimini’s beaches.
Perhaps you knew all of that, but you probably don’t know that it runs one of the strongest single-digit tax regimes left in Europe, and its ceiling on foreign income is one-third of what Italy now charges for the equivalent. And even though I know the country well and sat on the Scientific Committee of San Marino Innovation at one point, I missed the residency side of it for years.
But why have I started paying attention to San Marino now?
Two agreements in Brussels could make the whole thing materially more valuable by 2027. If you’re already evaluating Italy for a move, San Marino could belong on the same shortlist.
The tax stack
Before the numbers, one note about how San Marino works.
This is a microstate, and residency applications get decided one by one. The 7% track goes to the Congress of State, the government itself, which rules within 60 days. The pensioner track goes to a standing parliamentary commission on foreign affairs and immigration, which takes up to 120 days. In both cases the decision is final and cannot be appealed on any ground. There is no automated system, no self-service portal. Residency in San Marino is a face-to-face conversation with the country’s government. Just something to bear in mind.
As for the numbers, the whole stack fits on one page, and almost every line lands in single digits.
The 7% foreign income regime, called the “atypical residence”. All income produced abroad, business income, dividends, capital gains included, is taxed at 7%. Minimum €10,000 per year, maximum €100,000. Fifteen-year duration.
The cap is what changes the whole logic. At €100K it works effectively as a flat tax: at €5M of foreign income, you'd pay an effective 2% rate. And unlike Italy's own 7% regime, which is restricted to pensioners settling in towns under 30,000 inhabitants in the south and in the central earthquake zones, and runs for ten years rather than fifteen, San Marino asks for neither. Any legitimate foreign income qualifies. Fifteen years is a long time to keep that door open.
The 6% pensioner regime, and it’s renewable. Foreign pensions taxed at 6% for ten years, renewable as long as you keep meeting the requirements. The renewability is where San Marino pulls ahead of every pensioner regime still open in Europe.
The requirements: €120,000 of gross annual income and €300,000 deposited in a Sammarinese bank for the duration of the residence. Pensions, dividends and rental income all count toward the income threshold. One clarification: “public pensions excluded” means government-service pensions specifically. Under tax-treaty rules those stay taxable in the country that pays them, and San Marino cannot override that. The 6% is aimed at private and personal retirement income.
The corporate stack. 18% headline rate for now. San Marino raised it from 17% to 18% for the 2026 to 2030 tax periods, and it reverts after that. New companies get a 50% abatement for their first five tax periods, which is 9% while the 18% is running. That abatement is conditional: one full-time employee hired within six months of the licence, a second within twenty-four months. Certified high-tech startups pay 0% for the first three years, 4% for the next four, then 8% for another five. Twelve years without ever reaching a double-digit rate. Certification runs through San Marino Innovation, which within the possibilities of a microstate has built this framework properly. Roughly 5,000 companies are registered in the country, which is a serious number for 34,000 people.
Dividends to individuals: 5%. Across the border in Italy: 26%.
Crypto: 10% flat on realized gains. First €2,000 per year exempt, crypto-to-crypto swaps not taxable at all (Decree 150/2023). Italy moves to 33% in 2026, so the gap widens further.
No VAT. San Marino runs a single-phase tax on imported goods and that’s the entire system. For a B2B software business selling into the EU, this removes an entire compliance layer, because your EU clients handle VAT on their side. For B2C to EU consumers you still owe VAT at the customer’s country rate, like any non-EU seller. The clean win is B2B: SaaS, services, consulting.
No wealth tax. No exit tax.
The one full-rate item is the salary you choose to pay yourself from your own San Marino company. That’s local income, not foreign, so the 7% doesn’t apply. It’s taxed at ordinary progressive rates, topping out at 35% above €80K.
The sensible structure follows on its own: reasonable salary at ordinary rates, profits left in the company at 0%, distributions at 5%, and whatever you earn abroad taxed at 7% under the cap.
Not too bad.
How it compares
For pensioners, part of the reason nobody paid attention until recently is that they didn’t have to. Portugal’s NHR was objectively great for pensioners, and while that door was open nobody needed to look elsewhere. Portugal shut it. Greece’s and Italy’s 7% flat taxes are the closest still standing, but neither is renewable. San Marino is 6% and renewable, which is what a fifteen or twenty-year retirement horizon needs.
For non-pensioners with foreign income, the sharpest comparison is against Italy’s flat tax. Italy charges €300,000 flat per year on foreign income, capped, and runs for fifteen years. San Marino tops out at €100,000, one-third the Italian ticket, and also runs for fifteen years. If your foreign income is high enough to make either regime worth using, San Marino is a much cheaper ticket.
Against Gibraltar, the comparison lives on lifestyle more than on numbers. Both are microstates with niche regimes. San Marino has proximity in its favor: Italy is at the door, and the food and coast are the ones you already know and love.
Nothing about San Marino is Singapore, and nothing is Monaco. It’s a capped, single-digit environment inside Italy that most of the people who would benefit from it have never looked at.
The American question
There is no US-San Marino tax treaty. The only bilateral instrument is a 2015 FATCA agreement, which means your San Marino bank reports your accounts to the IRS, and that’s the full extent of it.
But the 7% is not a treaty benefit. It’s San Marino’s own domestic law, and it applies in full to Americans. What the missing treaty affects is the American side of the ledger.
Because the IRS taxes US citizens wherever they live, the 7% settles the San Marino bill and the US then calculates its own. Where the math works cleanly: salary under the Foreign Earned Income Exclusion, about $133,000 in 2026 and doubled for a working couple. Under that ceiling, US tax on the salary is close to zero, and your total burden really is around 7%. A founder paying themselves within that band fits.
Where the math gets bumpier: income above the FEIE ceiling, plus dividends and capital gains, where the US tops you up to normal rates. And if you own the company outright, the IRS reaches its lightly-taxed profits through the GILTI rules. Manageable, but the structuring has to happen before the move, with your accountant, not after.
The clean “€100K and done” outcome belongs to non-Americans, or to former ones.
Schengen, today and tomorrow
Today. San Marino is not in Schengen. If you’re visiting through Italy, legally your San Marino days don’t count toward the 90-in-180, because it’s not Schengen territory. In practice assume they do, because nobody stamps you in or out of San Marino, so your passport just shows Italy.
Living there as a non-European today: technically you’re limited to 90 days every 180 in the rest of Europe, because a San Marino permit is not a Schengen permit. In practice there are no checks between San Marino and Italy, and residents have circulated freely for decades. Tolerated, not a written right.
The passport axis matters here. Visa-exempt passports (US, UK, Canada) are only counting days. Visa-required passports (India, China) get very little from a San Marino permit on its own today, because every road into San Marino passes through Italy, and Italy is Schengen.
Coming, in two pieces.
The EU-San Marino Association Agreement was greenlit by the EU Council on July 16 this year, with signature planned for September, Parliament’s consent to follow, and full effect around 2027. This brings San Marino into the European single market, and free movement with the EU becomes law for Sammarinese citizens.
The EU-San Marino border agreement is a separate negotiation, running since September 2024. On the table: a San Marino permit recognized at Schengen borders, visa-free circulation 90 in 180, exemption from EES and ETIAS so you’re never miscounted as an overstayer. Not on the table: settling or working in another Schengen country. The price: Italy gets a binding say on who receives a San Marino permit as part of the deal. No signature date yet.
If both agreements land as expected, San Marino gets repriced meaningfully, especially for the passports that today need a visa to cross the street.
The frictions
Every regime has them, and this one is no exception.
Being neither in Schengen nor in the EU comes with baggage today: no tax treaty network to lean on, a small and personal banking sector, and an administration that works face to face on the mountain.
Citizenship takes twenty years and the Council’s approval. Italy, for comparison, takes ten. So don’t think of San Marino as a fast track to a European passport.
The 7% residence is capped at 100 approvals per year and has been consistently undersubscribed. The 6% pensioner track has its own ceiling of 500 per year, and requirements were tightened repeatedly through 2024 and 2025. For scale on the whole system: San Marino granted 91 atypical residencies in 2023, of which 58 were pensioners and 32 were under the 7% regime. So the stronger of the two regimes, the 7%, has spare capacity every year. The wealthy simply haven’t discovered it.
Some people describe San Marino as a boring place. Don’t expect New York. If daily buzz and international-city amenities are what you’re moving for, San Marino isn’t that.
And one thing worth stating plainly: this is a civil-law country and very much a microstate. The numbers are excellent, but this is a niche opportunity, one that works well if you know how to use it and doesn’t if you don’t. It is not Singapore by any means.
Who San Marino fits
Non-American UHNWIs with substantial foreign income. The €100K cap means the effective rate drops fast above roughly €1.5M of foreign income. San Marino is one-third the ticket of Italy’s flat tax at the same profile.
Non-American pensioners with €120K+ of gross annual income. The renewable 6% is the strongest pensioner regime in Europe still open.
Founders whose company is real and can operate from San Marino. Company at 0% in the initial years, dividends at 5%, foreign income at 7% capped, no VAT for B2B. Twelve years of single-digit corporate tax. The condition: a genuine local hire within six months, a second within two years.
Crypto-heavy portfolios. 10% flat from 2026, first €2K exempt, crypto-to-crypto not taxable. Italy at 33% from 2026 is the reference point.
Who it doesn’t
Anyone whose primary goal is a European passport in a hurry. Twenty years to citizenship with Council approval is not the tool.
Founders who need Singapore-scale infrastructure or a global banking network. San Marino’s banking system is small and personal by design.
Americans in the top salary bands who are structuring around it. The FEIE and GILTI interaction is manageable but non-trivial. The “€100K and done” outcome doesn’t extend to US citizens.
People who want a global-city environment. Rimini and Bologna both have their strengths, but this isn’t a large-metro life.
My personal take
The honest answer for why I missed this is quite boring.
I focused on the innovation and startup side of the country, which is what I worked on there, and I didn’t look into the personal-income regimes because, objectively, they never became mainstream. There were other options that did. The Portuguese NHR was great for pensioners until it closed, and Italy and Greece kept the wealthy busy. San Marino sat there with a 100-seat annual quota that never fills, undercutting everyone, and nobody noticed. Including me.
If you’re a non-American UHNWI or a pensioner with foreign income at the required level, and Italy or Greece is already on your shortlist, San Marino belongs on the same shortlist. If the two Brussels agreements land in 2027, the calculus tightens further: the same tax regimes, plus a residency that circulates freely across Schengen. That’s the kind of change that usually results in a regime being either closed or repriced, which is an argument for understanding it early rather than late.
I’m a big believer in specific solutions that generate outsized results. It’s almost a power law, and I see it applied across the board. If everyone makes the same choice, there are reasons to go mainstream, but there are also reasons to build your own strategy if a specific option happens to be the better one for you.
San Marino, for the right profile, is one of those.
That said, none of this is a tax-only decision. Your life comes first, the tax result follows. San Marino works when both sides of that make sense: the numbers, and the reality of living in a country of 34,000 people twenty minutes from the sea. If daily New York energy is what you need, look somewhere else.
If well-priced, well-connected, Italy-adjacent life is what you’re after, San Marino is one of the strongest options in Europe that nobody is talking about.
Bottom line
San Marino has been sitting inside Italy since 301 AD, and the residency opportunity it currently offers may be the single most ignored in Europe.
The tax code is one of the strongest single-digit environments left on the continent, and the Schengen upgrade could reprice the whole option in the next two years.
If you’re evaluating Italy for a move, put San Marino next to it before you decide.
If you missed the recent Italy pieces in the Hidden Cities series:
Reply and tell me what you’d want a deeper follow-up on: the founder stack, the pensioner track, the American question, or something I missed. Every message gets read.
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Stay free,
Ale
Writing from Lisbon