Inheritance tax must be paid by residents in Italy under certain conditions, that will be described below, when they inherit property – both real estate and movable property – wherever this heritage may be located (therefore also on assets held abroad).

• If the heirs are the spouse, children, or other relatives in a direct line (father, mother, grandchildren), a one million euro deductible is provided for each heir under which no tax is due; 4% tax is due on the part exceeding one million euros;
• If the heirs are brothers or sisters, there is a 100,000 euro deductible under which no tax is due; a tax of 6% is due on the part exceeding 100,000 euros;
• If the heirs are relatives other than those indicated above, there is no limit on taxation up to the fourth degree of relationship, and the inheritance received is taxed at 6%;
• For all the other heirs, there is no limit on the taxation and the inheritance received is taxed at 8%
• Furthermore, if the heir is a disabled person, the deductible under which no tax is due rises to 1.5 million euros.

If real estate located in Italy is included among the assets to be inherited, the mortgage tax of 2% and the cadastral tax of 1% is due, without any benefit from deductible exemptions.

 

Therefore, in the event that real estate located in Italy is inherited, there is still a 3% tax burden to be applied. This is, however, on the cadastral value of the asset, which currently in Italy is generally much lower than the market value.

 

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Photo: AFP

 

As we have already said, in cases where the inheritance tax is due in Italy, the assets held in foreign countries must also be calculated. 

 

In this case, it is probable that, for assets located abroad, an inheritance taxation will most likely also apply in the country in which these assets are located. In this case there is thus the risk that a hypothesis of double taxation is generated. 

 

According to Italian legislation, where inheritance tax has been applied to the same asset abroad, said foreign tax can be deducted from the tax to be paid in Italy. 

 

In addition, Italy has signed bilateral agreements aimed at eliminating double taxation in matters of succession with the following countries: Denmark, France, the United Kingdom, Greece, Israel, the United States of America, and Sweden.

 

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Finally, we should draw attention to the fact that, in the presence of assets worth more than 100,000 euros, or in any case in the presence of properties (whatever the value) that have fallen into succession in Italy, a specific declaration of succession must be presented. It is advisable to contact specialized professionals for this requirement.

 

Taxation on inheritance in Italy is certainly very “generous” compared to what happens in other countries. 

 

For this reason, for some years now there have been discussions in Italy of revising this tax, providing for an increase. In this sense, legislative proposals have been promoted aimed at increasing the rates and reducing the exemptions on succession tax. 

 

At the moment, however, the taxation applicable to successions in Italy is as described in this article.

 

MGI Vannucci e Associati are a team of English-speaking chartered accountants and tax experts based in Tuscany, Italy.

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