Your guide to paying inheritance tax in Italy

06.02.18
7 minute read
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Are you an expat, enjoying life in Italy? If you’re dealing with an estate or inheritance in Italy, the laws can be intricate. You’ll want to make sure you know when and how Italian inheritance tax law apply to non-residents, foreigners, and expatriates alike. Use this guide to help you get started in understanding inheritance rules, as well as possible exceptions to Italian inheritance taxes.

What is inheritance tax in Italy?

Italian inheritance tax, also called succession laws Imposta sulla Successione, require tax payments on both the estate and property of the recently deceased. Originally, non-property assets were dealt with under the laws of the country where the deceased last lived, and property was subject to the laws of where it was located. However, in 2015 the EU made a new rule and now non-Italian residents can state in their will that they want their assets distributed according to the laws of their own country, after their death.

(Source 1 Source 2 27 Dec 2017)

What types of inheritance taxes are there in Italy?

The main inheritance taxes in Italy are estate tax, for the entire estate, and property transfer tax. This tax is paid whenever there’s property involved in an estate (as opposed to just money or other assets).

(Source 1 27 Dec 2017)

Who has to pay inheritance tax in Italy?

When you’re a resident in Italy you have to pay inheritance tax on the worldwide assets of the deceased. Non-residents have to pay inheritance tax as well, but only on the deceased’s assets in Italy. The rate at which the heir will be taxed depends on their relationship to the deceased, a spouse or children, for instance, are taxed lower than siblings or an uncle or aunt. Italy also has double taxation agreements with several countries, such as the UK, Ireland, Spain and Portugal. You can find the full list of countries that Italy has a double taxation agreement with, on the website of the Dipartimento delle Finanze.

(Source 1 27 Dec 2017)

Non-resident inheritance tax

Italian inheritance law is based on a principle called “unity of inheritance”. What this means is that property and non-property assets are treated differently. All property assets of the deceased that are located in Italy, have to be taxed according to Italian rules. All other - non-property - assets should be taxed by the country where the deceased last lived, if this was Italy, then this means it should be taxed in Italy as well. However, a recent change under the European Succession Regulation now allows non-Italian residents to request to have their assets taxed according to the tax laws in their country of origin, provided that they specify this is an Italian will. The only catch is that the non-resident must be a citizen of an EU member state. Expats or foreigners from other countries are simply stuck with Italian laws.

(Source 1 27 Dec 2017)

Ownership of the property in Italy

Ideally, before your loved one passes away, he or she will have laid out their wishes in a will to determine future ownership of their property. Of course, this doesn’t always happen. When there’s no will to distribute assets, Italian succession law requires that family members are entitled to the property in a compulsory or forced share distribution, dividing the assets up by the closeness of the relative, from the spouse up to the sixth degree of relation.

Even if there is a will, Italian inheritance law ensures protection of the family through reserving legitimate succession of property. This long-standing rule prohibits certain family members from being written entirely out of the will, even if it goes against the wishes of the deceased.

The below table shows how the Italian estate will be divided when the deceased has left behind a spouse and/or a child/children, and there is a will:

Person legally entitled to the property in Italy Reserved part of the estate Freely disposable part of the estate
Spouse 1/2 of estate value and housing rights 1/2 of estate value
Spouse and 1 child 1/3 of estate value to child; 1/3 to spouse and housing 1/3 of estate value
Spouse and 2 children 1/2 of estate value to children; 1/4 to spouse 1/4 of estate value
1 child (no spouse) 1/2 of estate value 1/2 of estate value
2, or more, children (no spouse) 2/3 of estate value 1/3 of estate value

(Source 1, Source 2 27 Dec 2017)

How is inheritance tax calculated?

There are two kinds of Italian inheritance tax: estate tax imposta di successione and property tax imposta catastale. The rates of pay on estate tax differ depending upon the relation to the deceased. Property taxes are assessed by the rate of the property value on record Valore Catastale. The amount can also vary depending on the type of property. For example, an inherited family home is taxed at a fixed rate while other property is subject to an additional 3% tax.

(Source 27 Dec 2017)

How can I reduce the amount of inheritance tax I pay?

Making a will, and planning with an experienced estate professional, can lower the amount of taxes paid by beneficiaries. This can include making property jointly-owned, or creating a trust for intended heirs.

(Source 27 Dec 2017)

What are the inheritance tax thresholds in Italy for 2017-2018?

Inheritance taxes are due before any of the assets can be distributed. Below are the required estate and property taxes due for various relations:

Relationship to the deceased Estate inheritance tax Estate filing tax Property inheritance tax
Child or spouse 4% of amount exceeding €1 million for each heir 2% of real property value or €200 if property will be principal home 1% of real property value or €200 if property will be principal home
Sibling 6% of amount exceeding €100,000 2% of real property value or €200 if property will be principal home 1% of real property value or €200 if property will be principal home
Family members, further removed 6%, no exemption 2% of real property value or €200 if property will be principal home 1% of real property value or €200 if property will be principal home
Others 8%, no exemption 2% of real property value or €200 if property will be principal home 1% of real property value or €200 if property will be principal home

(Source 27 Dec 2017)

What constitutes a “gift tax” in Italy?

Italian inheritance and “gifts” are synonymous, meaning that all of the same allowances and tax rates apply to inherited property as well as gifted or bequeathed items.

(Source 27 Dec 2017)

What are the inheritance tax exemptions in Italy?

Italian inheritance tax only exempts a few items from taxation, including:

  • life insurance policies
  • government bonds
  • family business shareholdings

(Source 12 Dec 2017)

When do I have to pay inheritance tax?

An Italian declaration of inheritance dichiarazione di successione is due one year from the date of death. If there’s real estate in the inheritance, all property taxes must be paid prior to this submission and 30 days after submission of the declaration. If no tax payment is submitted, the beneficiaries won’t receive their inheritance, and fines or interest may be added as a penalty.

(Source Source 2 27 Dec 2017)

How do I pay my inheritance taxes in Italy? Can I pay online?

You can pay your Italian taxes online, but you’ll need to make sure the inheritance declaration has been sent and verified by the Italian Revenue Agency. Then, you can fill out the F24 form and have the Italian authorities debit your bank account.

You don’t have to make inheritance planning more confusing than it already is, by exposing yourself to high fees and costs when you have to transfer money into a different currency, to pay for inheritance taxes. TransferWise can help you save money by offering you the true mid-market exchange rate you’d find on Google. This rate can be up to 4-5% better than banks might offer, who sometimes take the opportunity to mark up the exchange rate and charge you hidden fees.

TransferWise also offers borderless multi-currency accounts that support international financial transactions and can support multiple currencies, including the Euro. Before you send your money, make sure to check if the Italian tax authorities allow third-party payments for your inheritance dues. If you don’t have your own Italian bank account, try transferring money to a friend or family member with a bank account in Italy —and don’t forget to use TransferWise to reduce fees.

Dealing with estate, gift and inheritance taxes is complicated enough in your home country. Paying taxes abroad can feel next to impossible to understand. One way to ease the headache is by using TransferWise, which affords quick and straightforward cross-border money transfers. That’s one less thing to worry about.

This publication is provided for general information purposes only and is not intended to cover every aspect of the topics which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from TransferWise Limited or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content is the publication is accurate, complete or up to date.

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