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Inheritance Law and Taxes

The Italian Succession process can be labyrinthine. It is easy to get lost. At an extremely difficult time, those left behind find they need to navigate their way through a maze of bureaucratic procedures, red tape and intricate documents that need the expertise of professionals.inheritance law and taxes

The succession procedure requires a series of steps  that allow the legitimate heirs of the deceased to  obtain possession of movable and immovable assets and bank accounts in the name of the latter. The first phases involve providing all documentation (death certificate, residence certificate, bank statements and many others). This constitutes a mandatory step to be able to proceed to all subsequent ones.

Following the death of a relative, it is necessary to prepare the declaration of succession of assets  owned by the deceased. The succession is regulated by the Italian Civil Code and consists in the transfer of assets, bank accounts, properties and liabilities, debts and back taxes, which the heirs are required  to cope with.

The 2019 Inheritance Tax is a tax that the heirs who inherit assets must pay to the State on the basis of the declaration of succession submitted to the Inland Revenue Agency.

What is taxable?

  • 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.

The declaration of succession must be submitted to the Inland Revenue Agency within one year from the date of death of the relative, unless the value of the inheritance is below 100 thousand Euro and there are no immovable assets or real estate rights.

In the event that said declaration needs be submitted, and is therefore mandatory, the Inland Revenue calculates the inheritance tax, taking into consideration the deductibles (franchigie), that is, the thresholds for exemption from the application of the tax[1].

The rule governing the taxation of inheritances and donations 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 is applied:

– spouse and relatives in a straight line (parents and children, children and parents, grandparents and grandchildren)

– other relatives up to the fourth degree (brothers and sisters, uncles and nephews, cousins)

– other subjects (relatives beyond the fourth degree and strangers).

For the transfer of assets and rights, the following rates are established with the respective deductibles:

– for the first group: 4% with an excess of € 1,000,000 for each beneficiary;

– for the second group: 6% with a franchise of € 100,000 for each beneficiary;

– for the third group: 8% without any deductible.

The tax is determined on the overall value of the assets and rights net of the charges borne by the beneficiary[2].

As you can see, Italian Inheritance tax is a very complex area and it may also change from case to case. For this reason, being supported by an expert is of crucial importance.

Get in touch if you are feeling unsure about anything inheritance tax-related and need advice: info@detulliolawfirm.com

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[1] The Italian Revenue Agency automatically applies the presumption of 10%. The presumption of 10% 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. The presumption of 10% can be avoided by attaching a detailed inventory of all inherited goods 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. They are based on the value of the real estate property included in your inheritance. These taxes are based on the same taxes you would pay for example, in case of sale of your 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.

To summarise Italian inheritance tax, you might find this table useful.

Italian inheritance and taxes - table