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 inheritance tax varies depending on the circumstances of the succession. Inheritance claims involving Italian properties are currently subject to two taxes: Estate Tax and Property Transfer Tax. Below please find details and examples.
The estate tax applies to the entire net value of the left estate, inlcuding movable and immovable assets. The applicable rate depends on the relationship of the beneficiary with the deceased, as follows:
- For spouses and children it is 4% of the estate value, with an allowance of EUR 1 million for each beneficiary.
- For siblings and close relatives (up to fourth degree of kinship) it is 6%. Each sibling is enttitled to an allowance of EUR 100,000.
- For any other subject it is 8%, without allowance.
Property Transfer Tax
When Italian property is involved, the succession is also subject to the property inheritance transfer tax which is 3% of the property value on record (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 principal 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 taxes due for the second succession a portion of the taxes paid for the previous one and save up to 50%.
Here you can find a chart summarizing the main Italian inheritance taxes with respect to standard inheritance cases involving Italian properties. The chart shows that Italian inheritance taxes vary depending on specific circumstances including:
- relation between the deceased and the inheritor, the
- inheritance value,
- how inheritor will use the property.
In particular, it shows that under certain circumstances, no proportional inheritance transfer tax applies.
1. Inheriting from Spouse, Parent or Grandparent, or Child
The inheritance transfer is subject to 4% inheritance tax on the value exceeding EUR 1 million, in addition to 3% registration tax on the basis of cadastral property value. If the property was jointly owned, the taxes apply exclusively to the inherited share. A property might be jointly owned even if only one spouse's name is on record. If the value of the inherited estate (or property share) is lower than EUR 1 million, the succession is subject only to 3% property transfer tax. If the inheritor lives in the property, the total taxes applicable to the succession would be EUR 336.
2. Inheriting from Sibling, Uncle or Aunt
The value of inheritance transfer is subject to 6% inheritance tax. Each sibling is entitled to claim an allowance of EUR 100,000, in addition to 3% registration tax on the basis of cadastral property value (if a property is involved). For a sibling's succession, if the value of the inheritance share is lower than EUR 100,000, there would be no estate tax, only property title transfer tax. The transfer of property title is subject to 3% transfer tax. If the property is used as inheritor's main home, or inheritor moves to Italy within 18 months, or lives in the same township, or is an Italian citizen living abroad, the 3% transfer tax above might be replaced by a flat tax equal to EUR 336.
As is typical with Italian law, the inheritance tax laws have been modified several times over the past years and further amendments in the near future cannot be excluded.