Italian Inheritance Tax
From our experience in dealing with international clients, we appreciate that inheritance tax (IHT) is a topic of concern, and understand that one of the first questions clients ask is: how much inheritance tax will I have to pay?
For this reason, we would like to share this brief and informative article to answer the most commonly asked questions concerning Italian inheritance tax and succession law. The article will be published in two parts; the fist will give you a view of the general principles that regulate Italian inheritance law, as well as the current regulation on this topic.
The second part will explain what the current thresholds, exemptions and relief are within inheritance tax in Italy, as well as who will be liable to pay them and when.
As a general principle, Italian inheritance law is based on the principle of ‘unity of inheritance’. This means that any liquid assets should be dealt with under the law of the country of deceased’s last residence. Instead, property assets shall be governed by the law of the country where the property is located according to the principle of lex rei sitae.
There is, however, a recent regulation by way of which it is possible to dictate what law shall be applied to your succession. This is not an automatic exercise but you should, instead, expressly state so in your latest Will and Testament. Thus, it is highly important that, before you dispose of your worldwide estate, you are duly informed of what are Italian law provisions so that your Will is not invalid in the future.
The Inheritance application (Dichiarazione di Successione)?
The Dichiarazione di Successione is the application form that it is submitted to the Italian Authorities and in which are declared the assets comprehended in the inheritance. As a brief summary, these are the main items to declare:
General information of the deceased, heirs, beneficiaries and legatees, if any. Note that in order to complete the form, all beneficiaries will require to have an Italian tax code (Codice fiscale).
- General information of the properties registered in the name of the deceased at the time of death. This will include real estate properties as well as parcel of land, garages, storage rooms and registered right (i.e. usufructus). Properties jointly owned with one or more people will also be declared.
- General information of all bank accounts, postal bonds, investment funds etc.
- Information in respect of any other existing companies, if any, in which the deceased had a share on.
Moreover, you should not forget to state in this form other items such as:
Debts and liabilities (i.e. funeral expenses);
- Expenses incurred by the heirs. Note that these are limited and should be strictly linked to the death. The standard expenses included are the funeral expenses.
What taxes do I have to pay in Italy?
If we talk about an inheritance which involved Italian assets, you should consider that some taxes will be payable in Italy. When talking about tax, we should identify three different types of taxes:
a. Cadastral Tax – Imposta catastale e ipotecaria
These are taxes could be defined as objective as they are calculated and applied to those cases where there are real estate assets involved only. These are calculated on the basis of the land registry value of the property (valore catastale) and not on the current market value.
These taxes, therefore, do not apply to those situations where only liquid assets are involved (i.e. bank account, bonds, postal bonds, investments funds, etc)
Overall, these taxes amount to 3 percent of the value of the real estate assets (i.e. properties, parcels of lands, villas, storage rooms, warehouses, garage, etc).
It should also be stated that the 3 percent is payable prior the inheritance application (Dichiarazione di Successione), jointly with all other relevant documents duly translated and certified, are filed before the relevant Italian Authorities. In fact, proof of payment shall also be enclosed within the bundle of documents.
It is important to indicate that, the Italian Authorities have established some minimum taxes due in any case. These is a provision for those situation in which the number of properties is reduced. In this case, these taxes will be of €400 per application.
b. Inheritance Tax – Imposta di successione
Differently from the above, these taxes could be defined as subjective taxes as they are applied on the basis of the relationship between the deceased and the beneficiary (next of kin).
The fact that these rules always apply does not mean that inheritance tax are always due.
In fact, the current regulation does establish certain exemptions and relief according to the grade of relationship each heir has with the deceased. We will expand on this point in a separate point. Note that these rules are applied irrespectively of whether or not the deceased left a last Will and Testament.
c. Other disbursements – Tassa ipotecaria, marca da bollo, tributi speciali
From a technical point of view, these cannot be considered as taxes but instead should be considered as contributions towards a service. In fact, these disbursements are fix and therefore are not linked to the status of the heirs or the value of the inheritance or assets involved.
In other words, these are disbursements payable to the Italian Authorities in order to allow them to process the application.
These amounts may vary from time to time depending on the number of land registries, banks and post office involved. The more entities we have to deal with, the higher the seal copies we shall obtain from the Revenue Office.
In any event, it is important to point out that these disbursements are not major.
The Italian Inheritance: English Speaking Italian Specialists Lawyers
We specialise in cross border inheritance probate. Thus, if you are seeking expert guidance on Italian inheritance tax, or any other aspect involving Italian law, please do not hesitate to contact us. We will be to provide you further information and to study in more depth the circumstances of your case on an individual basis. We look forward to assisting you.
For more information you can contact us on firstname.lastname@example.org or on (+39) 02 3663 8610. Alternatively, you can visit us on www.theitalianinheritance.com.
Note: The tax rates and reliefs quoted in this article were correct at the time of publishing, however these may change. It is essential therefore that you do not base any action on any of the information contained in this article and that you seek independent advice first.