Italian Inheritance Tax

Italian inheritance law is founded on the principle of ‘unity of inheritance’, which means that any non-property assets are dealt with under the law of the country of last domicile, and property assets must be handled according to the law of the country where the property is located.

A new EU ruling in 2015 did however amend this rule, in as much as it is now possible for foreign nationals living in Italy to stipulate via an Italian will, that they wish the law of their home country to apply when distributing their Italy-based assets on their death.

If you own assets located in Italy therefore, it is imperative you are clear  Italian inheritance law  and the potential implications are for your heirs concerning Italian inheritance tax.

Giambrone & Partners has offices across Europe, including Italy and the UK.  Our English speaking Italian lawyers' depth of knowledge surrounding Italian inheritance law and the associated tax system is extensive. 

Below are the most commonly asked questions concerning Italian inheritance tax and succession law.  

The main differences between UK and Italian inheritance law

In England & Wales, inheritance law offers option to be able to will your estate to whomever you please, proving you are of sound mind.  There is no obligation to include immediate family members. 

This testamentary freedom does not exist however under Italian inheritance law.

Italian law dictates that when someone dies, certain members of their family have a legal right to inherit a fixed share of their estate. The law, known as ‘forced heirship’ will apply if no will, has been drafted or where a will is ruled invalid.  This means that forced heirship applies, unless stipulated otherwise in an Italian will.

In August 2015 however, newly introduced European Commission regulations meant that non-Italian residents who were citizens of EU member states are allowed to choose to stipulate in their Italian will that their fixed assets should be dealt with according to the law of their home country.

This new European Succession Regulation was introduced with the goal of simplifying cross-border succession. It did not, however, have any bearing on Italian inheritance tax, which could still be payable by non-residents on any assets located in Italy.

Is my English will valid in Italy, or should I make an Italian will?

For British citizens with fixed assets such as land or property situated in Italy, or those who have made Italy their permanent home, it is  advised that an Italian will is drafted. Whilst and will drafted under the law of England and Wales is valid in Italy, it would have to be authenticated by an Italian Notary Public before probate can proceed. Numerous challenges can and do surface when dealing with foreign language wills and all the associated documents have to be officially translated into Italian. The cost of this cqan often be  higher than drafting an Italian will in the first place.

It is best practice to create independent wills in each country where assets are owned, however it is essential that the wills do not conflict or revoke each other is very important.  Giambrone & Partners multi-lingual, multi-jurisdictional lawyers have the capacity to fully understand both the inheritance law and the language applicable in both countries. 

Additionally, if you have an Italian will, then it could result in a reduced liability for Italian inheritance tax, as well as reducing the likelihood of disputes between beneficiaries and making it clear to the Italian authorities as to how you wish for your assets to be bequeathed.

Is Italian inheritance tax payable by everyone, or are there exceptions?

Italian inheritance tax ("Imposta sulle Successioni") is payable by any individual who resided in Italy, and applies to all the worldwide assets of  the deceased.

In the case of non-residents, Italian inheritance tax still remains payable, however it is only calculated on the Italian assets in Italy. There are various cross-border agreements in place, including with the UK, that prevent the double taxation of estates.  Instructing a legal expert  experienced cross-border inheritance law is so important to ensure no more tax than necessary is paid by your beneficiaries.

If an estate includes a business, or a significant shareholding in a company, then these assets will not be taxed if they are passed to the deceased’s children, providing the children continue the business or take control of the company for a minimum of five years.

What are the rates of Italian inheritance tax?

There are two types of tax payable under Italian inheritance law.

The first is estate tax ("Imposta di Successione"). This applies to the full net value of the estate, including fixed and non-fixed assets. The rate of tax varies according to the deceased's relationship with the beneficiary. Children and spouses have a generous allowance of €1 million before any estate tax is payable, if the estate exceeds the allowance, tax is then levied at four per cent. In the case of disabled children, the initial allowance rises to €1,500,000.

Siblings have a €100,000 allowance before tax, after which they must pay the estate tax at six per cent. Family members up to the fourth level of kinship, marriage or adopted relatives up to the third degree of kinship pay six per cent, with no exemption. Everyone else is liable to pay eight per cent, with no exemption.

The second tax rate payable under an Italian inheritance is property transfer tax ("Imposta Catastale"), which is applicable when ownership of a property located in Italy to be transferred. This is charged at an aggregate rate of three per cent of the property value on record, (‘Valore Catastale’), which is usually in the region of 30 to 40 per cent lower than the market value. There is also a mortgage tax payable at two per cent of the property value on record, or €200 if the property will remain the primary residence of the beneficiary.

Is everything inherited liable to Italian inheritance tax?

Not everything is taxable under Italian inheritance law. Real estate, private bonds, shares or equity in a non-family business, managed funds, trust assets, savings and bank accounts, jewellery and furniture are taxable assets. Unit linked whole of life policies, government bonds and shares or equity in a family business are not, however.

If you have made a will in the UK, you will not necessarily avoid Italian inheritance tax. It is also important to be aware that even if no inheritance tax is due, an Italian inheritance tax return must still be submitted within one year from the date of death.

Who has to pay the Italian inheritance tax, and how is it paid?

The beneficiaries of Italy-based assets will be required to obtain an Italian Grant of Probate ("Dichiarazione di Successione") so that assets can be released to them. This must be done within one year of the date of death. Once completed, the application is sent to the Italian tax authority at which point the beneficiaries are asked to pay any Italian inheritance tax due. The assets of the estate cannot be distributed until the tax is paid.

Will my beneficiaries have to settle inherited debts?

Italian inheritance law dictates that when beneficiaries inherit an estate, as well as being entitled to the assets within that estate, they also become responsible for the deceased’s debts and liabilities. Should those debts and liabilities exceed the assets, the beneficiaries are able to decline the estate in its entirety.

An Italian inheritance law specialist will be able to calculate the potential gains or losses to be made on an estate before a beneficiary decides whether to accept it. If they do not accept their inheritance, then the estate will fall to the next in line to inherit.

How can I minimise the Italian inheritance tax payable by my beneficiaries?

By making an Italian will, you have the opportunity to legally mitigate the amount of tax payable by your beneficiaries on your death.  Giambrone & Partners' experienced expert inheritance lawyers can advise and help mitigate your beneficiaries tax liability. 

Estate planning measures will need to follow well-planned strategies. Options may include adding a potential beneficiary on the title deed at the time of purchasing a property in Italy whilst naming you, as the investor in the property, should own a life interest in it, whilst the beneficiary owns the remainder interest. This will result in an automatic transfer of full ownership to your beneficiary when you die.

Other options at the time of purchase may include buying through a company.

If you have already purchased your property then there may be other structures that will help to minimise taxes, Giambrone & Partners' inheritance lawyers can advice on strategies to match your particular circumstances.

For expert guidance on Italian inheritance tax, Giambrone’s dedicated English speaking specialists based both in the UK and in Italy will be able to guide you according to the regional, national and EU laws that apply, whether you are a beneficiary or the owner or potential owner of assets in Italy. To discuss your enquiry on an individual basis, please get in touch. We look forward to assisting you.

Note: The tax rates and reliefs quoted in this article were correct at the time of publishing, but these and applicable laws may change. It is essential therefore to seek tailored advice, and not to be reliant on or base any action on any of the information contained in this article.

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