ItalianTaxes.com

‍Introduction

Inheritance tax in Italy (Imposta di Successione) is a key consideration for both Italian residents and foreign nationals inheriting assets in the country. Whether the inheritance involves property, money, or other assets, understanding the rules and procedures can help avoid unexpected costs and ensure a smooth transfer process.

While Italy’s inheritance tax rates are relatively modest compared to many other European countries, the specific tax burden depends on several factors—most notably the relationship between the deceased and the beneficiary, the value of the estate, and potential exemptions. For foreign nationals, additional complexities arise due to international residency, foreign asset holdings, and cross-border tax treaties.

Does Inheritance Tax Apply to You?

You may be subject to Italian inheritance tax if:

The deceased was a resident of Italy at the time of death.
You inherit property or assets located in Italy, regardless of your own residency.
The value of the inheritance exceeds applicable tax-free thresholds.

Conversely, if the deceased was not an Italian resident and the inherited assets are located outside of Italy, Italian inheritance tax does not apply. However, the heir may still face tax obligations in their country of residence.

Who Pays Inheritance Tax in Italy?

Inheritance tax in Italy is paid by the heirs and beneficiaries, not by the estate itself. The applicable tax rate and exemption depend on the degree of kinship with the deceased.

Inheritance Tax Rates and Exemptions

The following demonstrates the allowable exemptions per category:

Spouse & Children: 4% tax-rate and €1,000,000 per heir exemption

Siblings: 6% tax-rate and €100,000 per heir exemption

Other Relatives (up to 4th degree): 6% tax-rate and no exemption

Unrelated Beneficiaries: 8% tax-rate and no exemption

If an heir has a certified disability, the exemption amount increases to €1.5 million. Only the value exceeding the exemption is taxed.

How Is Italian Inheritance Tax Calculated?

The taxable base depends on the type of asset:

Cash, investments, and financial assets: Tax is applied to the total inherited value.
Real estate: Tax is calculated based on the cadastral value (rendita catastale), which is typically lower than the market value.
Business interests or company shares: May be exempt under certain conditions, particularly if the heir maintains business continuity.

Example:

A son inherits a property in Italy valued at €1.5 million. With a €1 million exemption, the taxable portion is €500,000. At a 4% tax rate, the inheritance tax due is €20,000.

Inheritance Tax for Foreign Nationals

Foreign nationals inheriting assets in Italy should be aware of:

Double taxation treaties: Italy has agreements with many countries, including the U.S., UK, and France, to prevent taxation of the same inheritance in both jurisdictions.
Home country obligations: Some countries, such as the United States, may tax global inheritances regardless of where the assets are located.
Administrative requirements: Foreign heirs must obtain a Codice Fiscale (Italian tax ID) and may need legal or tax representation in Italy.

Strategies to Minimize Inheritance Tax

Advance estate planning: Setting up trusts, life insurance, or gifting assets during one’s lifetime can reduce taxable estate value.
Cadastral value optimization: Ensuring property is registered under the appropriate category may lower its taxable base.
Utilizing tax treaties: Proper application of international agreements can avoid or reduce double taxation.

How to Declare and Pay Inheritance Tax in Italy

File the Succession Declaration (Dichiarazione di Successione): This must be submitted to the Agenzia delle Entrate within 12 months of the date of death.
Register inherited real estate: The Catasto (property registry) must be updated to reflect new ownership.
Pay inheritance tax: If applicable, tax is paid using an F24 form through an Italian bank or authorized intermediary.
Pay ongoing property taxes: Heirs become responsible for IMU (property tax) and other municipal levies on inherited real estate.

Common Mistakes to Avoid

Missing the succession declaration deadline: Filing late can result in interest charges and penalties.
Overlooking international tax obligations: Failure to coordinate tax filings in both Italy and your home country may lead to overpayment or audits.
Improperly structuring the sale of inherited property: Selling an inherited asset without proper documentation may result in unexpected capital gains tax.