Italy is one of the biggest tax havens for Inheritance Law

The Question: How much is the Italian inheritance tax? Who pays taxes on an Italian succession? What are the implications when an Italian property is involved in a succession?

Answer: Italian successions are subject to two taxes: Estate Tax and Property Transfer Tax, as follows.

ESTATE TAX 

Estate tax applies to the entire net value of the left estate, inlcuding movable and immovable assets. Rates depend on the relationship of the beneficiary with the deceased, as follows:- Spouses and children: 4% of the estate value, with an allowance of EUR 1 million for each beneficiary.- Siblings and close relatives (up to fourth degree of kinship): 6%. Each sibling is enttitled to an allowance of EUR 100,000.-

Any other subject: 8%, without allowance.

PROPERTY TRANSFER TAX 

When an Italian property is involved, the succession is also subject to the property inheritance transfer tax which is 3% of the property value on record, in Italian “Valore Catastale”, typically 30%-40% lower than the actual property market value.

EXCEPTIONS AND REDUCTIONS 

Some assets are not subject to inheritance estate tax at all, such as Italian Tresury bonds and life insurance. Also, if certain criteria are met, it is possible to neutralize the 3% property transfer tax. For instance, if the beneficiary is an Italian citizen living abroad without other properties in Italy or if the beneficiary will use the property as a main residence. Further reductions might apply in other cases, such as when a succession includes assets coming from a previous succession. In this case it might be possible to deduct from the inheritance estate tax due for the second succession a portion of the taxes paid for the previous one and save up to 50%.