Italy Inheritance Tax: A Guide for Expats & UK Residents

TL;DR: In Italy, inheritance tax, known as Imposta di Successione, varies based on your relationship to the person who died. Spouses, children, and parents can inherit up to €1 million EUR tax-free, with a 4% tax rate on amounts above that. Siblings get a €100,000 EUR allowance and pay 6%. Other relatives and non-relatives pay 6% or 8% with no allowance. If the estate includes real estate, an additional 1% property transfer tax and 2% mortgage tax apply, though these can be fixed at €200 EUR for a family home. These rules apply to Italian tax residents for worldwide assets, and to non-residents for assets only in Italy, which is crucial for those living across borders.

Imagine you’ve built a life in Italy, perhaps splitting your time between Florence and your home country, or you’re managing family affairs from afar. Suddenly, you’re faced with the complex task of understanding inheritance laws after a relative passes away. This can be especially daunting when dealing with foreign tax systems and managing assets across borders. Italy’s inheritance tax, called Imposta di Successione, has specific rules for residents and non-residents alike. Knowing these details is key to managing an estate without unexpected surprises, helping you focus on staying connected with family during difficult times.

What is Inheritance Tax in Italy?

Inheritance tax is a payment made to the government from the wealth left behind by someone who has died. This wealth, known as an ‘estate’, usually includes all their property, personal belongings, savings, investments, and pensions. Many countries have some form of inheritance tax system. Around the world, it might be called estate tax, inheritance tax, or succession tax. However, not every country charges this type of tax. For example, Australia, Singapore, Sweden, and Norway are some of the countries that do not have any inheritance tax at all, according to The Telegraph.

In Italy, the official name for inheritance tax is Imposta di Successione. The rules for this tax are the same across the entire country; they do not change from one region to another. A key difference from the UK system is that in Italy, each person who receives an inheritance (each beneficiary) pays the tax themselves. This is not like the UK, where the tax is paid by the estate as a whole before anything is given out.

Each beneficiary in Italy has their own tax-free amount. This means they only pay tax on any inherited money or assets that are worth more than this limit. This tax-free amount is quite generous, especially for the spouse and children of the person who died.

Italy’s inheritance tax laws also include another tax specifically for real estate. This is known as property transfer tax or Imposta Catastale. This tax is calculated based on the cadastral value of the property. The cadastral value is a special price given to the property by local government offices, and it is usually lower than what the property would sell for on the open market, as explained by Giambrone Law.

Who Needs to Pay Inheritance Tax in Italy?

Italian inheritance taxes apply to all beneficiaries who are considered tax residents in Italy. If you are an Italian tax resident, you must pay inheritance tax on all property and assets you inherit, no matter where in the world those assets are located. This means if the person who died owned property in another country, and you live in Italy and inherit it, you will still have to pay Italian inheritance tax on it.

Italy’s inheritance taxes also apply to people who are not Italian tax residents (non-residents). However, non-residents only pay inheritance tax on property and estates located within Italy. For example, if you live in the UK and inherit an apartment in Italy, you would likely need to pay Italian inheritance tax on that apartment, even if you are not an Italian resident.

It is important to remember that each beneficiary is responsible for paying their own share of the inheritance tax to the Italian authorities. This system is different from what you might find in some other countries, like the UK, where the tax is usually paid as one sum from the deceased person’s estate before any assets are distributed.

If you live between different countries or own property in multiple places, figuring out which country’s tax laws apply to you can be very complicated. Because of this, it is highly recommended to get professional tax advice. An expert can help you understand your specific situation and ensure you meet all your tax obligations, no matter where your assets or beneficiaries are located.

What Are the Inheritance Tax Rates and Allowances in Italy?

The way inheritance tax is calculated in Italy is different from a system like the UK’s, which often uses a single tax rate for estates above a certain value. In Italy, the tax rates change depending on how closely the beneficiary is related to the person who died. Spouses and children benefit from lower tax rates, while the rate becomes slightly higher for siblings, other relatives, and people who are not related to the deceased but are entitled to inherit.

Beneficiaries who are related to the deceased also receive a personal tax-free allowance. This means they do not have to pay any tax on the amount they inherit up to this limit. Only the portion of the inheritance that goes beyond this threshold is taxed. For close family members, this personal allowance is very generous at €1 million EUR. Because of this high allowance, many people will not have to pay any inheritance tax at all.

Here is a table showing the current personal tax-free allowances and Italy inheritance tax rates:

Relationship to deceased	Personal Allowance	Inheritance Tax Rate
Spouse	€1 million EUR	4%
Children and grandchildren	€1 million EUR	4%
Parents and grandparents	€1 million EUR	4%
Siblings	€100,000 EUR	6%
Relatives up to the fourth degree	None	6%
Other heirs and non-related beneficiaries	None	8%

Beyond the inheritance tax, there are also other taxes to consider if the estate includes a house or any other real estate property. The Imposta Catastale, or property transfer tax, is 1% of the property’s cadastral value. Additionally, a mortgage tax of 2% applies, as confirmed by Giambrone Law. These property-related taxes are separate from the main inheritance tax.

What Assets Are Taxed and What Are Exempt in Italy?

Under Italian inheritance laws, nearly all types of property and assets are considered taxable. To figure out the total value, the estimated worth of real estate, personal possessions, and money is added up. If the person who died had any debts, these debts are then subtracted from the total value of the assets. The final number after subtracting debts is the total taxable value of the estate. This is how the Italian tax authorities determine the taxable assets Italy inheritance covers.

However, there are a few important exceptions to these rules. Some assets are exempt from inheritance tax. These include:

• Unit-linked whole life policies: These are a type of insurance policy.
• Government bonds: These are special loans made to the government.
• Shares or equity in family businesses: In certain situations, these can be exempt.

Specifically, if a business or a large shareholding in a company is part of the estate and is passed on to the deceased person’s children, it may be exempt from tax. This exemption applies only if the children take control of the business and manage it for at least five years, according to Mazzeschi.

Additionally, if a property is a family home and will continue to be used as such by the beneficiaries, the property transfer tax (Imposta Catastale) and the mortgage tax will be much lower. Instead of being calculated as percentages, they will be limited to a fixed amount of €200 EUR each. This provides a significant relief for inherited family homes. Managing finances for international property can be complex; see our guide on buying property in Como as a foreigner.

How Do You Calculate Inheritance Tax in Italy?

Calculating inheritance tax in Italy involves a few clear steps. Understanding this process can help you prepare if you are a beneficiary, especially if you live in a different country and need to manage financial matters from afar.

Here is a simple overview of how inheritance tax in Italy is calculated:

1. Calculate the taxable net asset: First, you need to determine the total value of the estate. This is done by adding up the value of all assets (like property, bank accounts, and possessions) and then subtracting all liabilities (any debts the deceased person had). The result is the net value of the estate.
2. Distribute the net asset among heirs: The net asset is then divided among the people who are inheriting. This division follows Italian inheritance laws and any specific wishes laid out in the deceased person’s will. Italian law has specific rules about how much certain family members must receive, which can affect this distribution.
3. Deduct personal allowances for each beneficiary: For each person inheriting, their individual tax-free allowance is taken away from the amount they are set to receive. This allowance depends on their relationship to the deceased, as shown in the table above.
4. Apply tax rates to the remaining sum: Finally, the appropriate inheritance tax rate is applied to the amount that is left over for each beneficiary after their personal allowance has been deducted. This rate also depends on their relationship to the deceased.

How Do You Pay Inheritance Tax in Italy?

If you are a beneficiary who needs to pay inheritance tax in Italy, you must file an official document called a ‘Declaration of Succession,’ or Dichiarazione di Successione. This document informs the Italian tax authorities about the estate and who is inheriting from it.

To complete and file this declaration, you will need several important documents. These typically include:

• The death certificate of the deceased person.
• Identification documents for the person who died.
• Title deeds for any property included in the estate.
• A certified copy of the will, if one exists.
• Other key pieces of information related to the assets and liabilities.

Once the tax authorities have assessed the estate and determined how much tax is owed, you will be informed. Any inheritance tax you owe must be paid within 60 days after you receive this assessment, as stated by Giambrone Law.

You can usually pay inheritance tax in Italy online. Alternatively, you can contact the Italian Revenue Agency directly to find out about other methods of payment. For those splitting their time between countries, managing financial transfers for tax payments can be a hurdle. Dealing with international payments often requires careful planning; discover more about cash vs. card payments in Italy to ensure your transactions are smooth.

Common Questions About Inheritance Tax in Italy

Here are answers to some of the most frequently asked questions about inheritance tax in Italy.

How much can you inherit in Italy without paying tax?

The amount you can inherit in Italy without paying Imposta di Successione Italy depends entirely on your relationship to the person who has passed away. Depending on whether you are a direct relative, a sibling, or not related, you will have a tax-free allowance ranging from €100,000 EUR to €1 million EUR. For instance, spouses, children, and parents can inherit up to €1 million EUR without paying tax, while siblings have an allowance of €100,000 EUR. Other relatives and non-relatives do not have a personal tax-free allowance.

Do people from other countries pay inheritance tax in Italy?

Yes, foreigners can pay inheritance tax for foreigners in Italy. If you are not living in Italy but own real estate property there, you may be required to pay local inheritance taxes on that property. You might also need to pay the property transfer taxes associated with it.

If you are living in Italy as an expat, for example, from the UK, and are considered a tax resident in Italy, then you will have to pay inheritance tax in Italy on everything you inherit above your personal tax-free allowance. This includes property and assets located in other countries, not just Italy.

The UK and Italy have a double taxation treaty in place. This agreement aims to prevent individuals from paying tax on the same income or assets twice. However, you will need to get expert advice to confirm if and how this treaty applies to your specific inheritance situation. It is always recommended to seek professional tax advice to understand which country’s tax laws apply to you and what your obligations are, especially if you’re navigating inheritance tax Italy UK rules. For expats living in Italy, understanding how to manage finances across borders is crucial. This includes knowing your tax obligations and how to keep your essential services active, like how to keep your UK number abroad if you’re a British citizen.

How is inheritance divided under Italian law?

Italy uses a system known as ‘forced heirship’ to determine how inheritances are divided. This is a fundamental part of Italian succession laws. Under this system, certain close relatives of the person who died (like children, spouse, and sometimes parents) are considered ‘forced heirs’. They have a legal right to inherit a specific share of the estate, regardless of what is stated in a will.

The division of the estate is determined by these forced heirship rules, alongside any specific wishes or stipulations laid out in the deceased person’s will. If there is no will, or if the will is found to be invalid for any reason, then the entire estate will be divided strictly in line with the country’s forced heirship laws. This ensures that close family members are protected, as detailed by Mazzeschi.

Are there any EU countries without inheritance tax?

Yes, within the European Union, several countries do not charge inheritance tax. For those considering living abroad in different EU countries, it’s wise to research local financial regulations. For instance, if you’re planning a move, our moving abroad checklist can help you prepare, no matter the destination, like Germany or Spain.

The following EU countries no inheritance tax currently:

• Austria
• Cyprus
• Estonia
• Latvia
• Malta
• Romania
• Slovakia
• Sweden

This information is based on reports regarding inheritance tax across Europe, such as those from Euro News. It is important to note that tax laws can change, so always check the most up-to-date information for any country you are interested in.

Related reading

• Italy Inheritance Tax: A Guide for Expats & UK Residents