Inheritance Law And Tax in Italy

The Italian Succession process can be labyrinthine

At an extremely difficult time, those left behind find they need to navigate their way through a maze of bureaucratic procedures, red tape and paperwork. It is easy to get lost in Italian inheritance law without help.

The Italian succession process involves a series of steps that allow legitimate heirs to obtain possession of a decedent’s movable and immovable assets and bank accounts.

Firstly, heirs will need to gather all the required documentation (death certificate, residence certificate, will, bank statements and others). In order to proceed, having all the paperwork together is crucial.

Declaration of succession

Secondly, heirs will need to prepare a declaration of succession. This comprises all the assets in the deceased’s estate. Heirs must submit their declaration of succession to the Italian tax authorities.

Italian Civil Code regulates succession. It consists of transferring assets, bank accounts and properties to heirs, who are also responsible for managing any liabilities, debts and back taxes.

The Italian tax authorities should receive the declaration of succession within one year from the deceased’s date of death. Where the value of an estate is below €100.000 and does not comprise property, a declaration is not necessary.

What is taxable?

The third step is paying inheritance tax. In accordance with 2019 inheritance tax law, heirs who inherit Italian assets are liable for tax based on the assets in their declaration of succession.

Italian inheritance law stipulates that the following assets are liable for tax:

Immovable property (houses, shops, buildings), agricultural or building land.

Movable property, including boats, jewellery, works of art, bank and post office current accounts, money, investments such as shares, bonds, trust funds, etc.

Companies and shareholdings, with the exception of cases provided for by law which exempt heirs from the inheritance tax.

How is Italian inheritance tax calculated?

Once the Italian tax authorities receive a declaration of succession, they calculate applicable estate tax. The calculation considers any deductibles (franchigie). That is to say, the calaculation takes into account any thresholds for exemption from applicable tax[1].

The law governing taxation of inheritances and gifts is the “Consolidated Tax Registration Law” (Legislative Decree No. 346 of October 31, 1990).

For tax purposes, three bands have been created, based on the degree of kinship, for each of which a different rate of tax is applicable. Tax rates are determined on the overall value of the assets and rights – net of any charges borne by the beneficiary[2].

Band 1 inheritance law tax:

Spouse, registered partner and relatives in a direct line (parents and children, children and parents, grandparents and grandchildren)

Tax: 4% with an excess of €1,000,000 for each beneficiary

Band 2 inheritance law tax:

Other relatives up to the fourth degree (brothers and sisters, uncles and nephews, cousins).

Tax: 6% with a franchise of €100,000 for each beneficiary;

Band 3 inheritance law tax:

Others (relatives beyond the fourth degree and unrelated people such as friends).

Tax: 8% without any deductibles.

Finally …

As you can see, Italian Inheritance law and tax is complex. In addition, it may differ from case to case. Because of this, it is worth seeking expert support. For a more comprehensive clarification of Italian inheritance law and tax, you might find our free guide useful.

At De Tullio Law Firm, we have over 55 years of experience managing Italian inheritance matters. If you are feeling unsure about anything to do with inheritance law and tax and need advice, please get in touch with us. We are here to help.

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[1] The Italian Revenue Agency automatically applies the presumption of 10%. This assumes that the value of your inheritance is higher by at least 10%, since an inheritance would generally include items such as jewellery and movable assets not expressly declared. To avoid the presumption of 10%, attach a detailed inventory of assets to the declaration of succession.

[2] In addition to the above, even where no inheritance tax is due, Italian government fees to transfer Italian real estate holdings apply. Your inheritance will therefore be subject to mortgage and cadastral taxes in addition to inheritance tax, where applicable. These taxes are based on the value of property included in your inheritance. Tax is the same as you would pay for example, in case of a sale of property.

Mortgage Tax:2% of real estate property value as set by cadastral records, not the appraised value, for a minimum of €200.

Cadastral Tax:1% of real estate property value as set by cadastral records, not the appraised value, for a minimum of €200.

 

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