Why Italy’s inheritance taxes aren’t as high as you might expect

Inheritance taxation in Italy is much more advantageous than in other European countries. In fact, it ranges from 4% to 8% - and in many cases is not even applicable. But what exactly is the inheritance tax and how does it work in Italy? Tuscany-based tax experts MGI Vannucci e Associati explain.

Why Italy's inheritance taxes aren't as high as you might expect
Property and other assets are often passed down through the generations in Italy, and inheritance tax rules are favourable. Photo: AFP

Inheritance tax must be paid by residents in Italy under certain conditions, that will be described below, when they inherit property – both real estate and movable property – wherever this heritage may be located (therefore also on assets held abroad).

The Italian inheritance tax concerns not only the assets of Italian citizens, but also all assets, in Italy and abroad, of foreign citizens if they have their tax residency in Italy at the time of their death.
On the other hand, the Italian inheritance tax is calculated only on assets located in Italy if the deceased, whatever their citizenship, is not a tax resident in Italy at the time of their death.
The Italian law governing inheritance tax provides for different taxation depending on who is receiving the inheritance, and there are some cases in which no tax is due. 
In particular:
  • If the heirs are the spouse, children, or other relatives in a direct line (father, mother, grandchildren), a one million euro deductible is provided for each heir under which no tax is due; 4% tax is due on the part exceeding one million euros;
  • If the heirs are brothers or sisters, there is a 100,000 euro deductible under which no tax is due; a tax of 6% is due on the part exceeding 100,000 euros;
  • If the heirs are relatives other than those indicated above, there is no limit on taxation up to the fourth degree of relationship, and the inheritance received is taxed at 6%;
  • For all the other heirs, there is no limit on the taxation and the inheritance received is taxed at 8%
  • Furthermore, if the heir is a disabled person, the deductible under which no tax is due rises to 1.5 million euros.
For example, assuming that an Italian resident with a patrimony of four million euros dies, leaving his wife and two children as his heirs, with the patrimony shared equally among them, the following taxation occurs: 
Each heir receives a fortune of 1.33 million euros (1/3 of 4 million). Since the heirs are the spouse and the two children, the exemption allowance of one million euros applies to each of them, and 4% is applied to the surplus. So each has to pay 13,333 Euros (4% of 333,333 euros). 
Therefore, on a total inheritance of 4 million, the inheritance tax to be paid is equal to 40,000 euros (with an incidence of only 1% on the total inherited assets).
The following table offers a summary:
If real estate located in Italy is included among the assets to be inherited, the mortgage tax of 2% and the cadastral tax of 1% is due, without any benefit from deductible exemptions.
Therefore, in the event that real estate located in Italy is inherited, there is still a 3% tax burden to be applied. This is, however, on the cadastral value of the asset, which currently in Italy is generally much lower than the market value.
Photo: AFP
As we have already said, in cases where the inheritance tax is due in Italy, the assets held in foreign countries must also be calculated. 
In this case, it is probable that, for assets located abroad, an inheritance taxation will most likely also apply in the country in which these assets are located. In this case there is thus the risk that a hypothesis of double taxation is generated. 
According to Italian legislation, where inheritance tax has been applied to the same asset abroad, said foreign tax can be deducted from the tax to be paid in Italy. 
In addition, Italy has signed bilateral agreements aimed at eliminating double taxation in matters of succession with the following countries: Denmark, France, the United Kingdom, Greece, Israel, the United States of America, and Sweden.


Finally, we should draw attention to the fact that, in the presence of assets worth more than 100,000 euros, or in any case in the presence of properties (whatever the value) that have fallen into succession in Italy, a specific declaration of succession must be presented. It is advisable to contact specialized professionals for this requirement.
Taxation on inheritance in Italy is certainly very “generous” compared to what happens in other countries. 
For this reason, for some years now there have been discussions in Italy of revising this tax, providing for an increase. In this sense, legislative proposals have been promoted aimed at increasing the rates and reducing the exemptions on succession tax. 
At the moment, however, the taxation applicable to successions in Italy is as described in this article.
MGI Vannucci e Associati are a team of English-speaking chartered accountants and tax experts based in Tuscany, Italy.

READ ALSO: The real cost of buying a house in Italy as a foreigner

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Five essential things to know about filling out your Italian tax return

Italy's tax season begins in May, and the bureaucracy involved can be daunting. Here are some of the most important things to know about filing your tax return.

Five essential things to know about filling out your Italian tax return

Tax season is now underway in Italy as the window for filing your personal income tax return opened on May 11th, 2023.

The deadline for submitting your tax return this year is October 2nd – find a detailed list of Italy’s tax dates and deadlines here.

Filing a tax return is never the most enjoyable task, but dealing with a new country’s rules and language adds another layer of complexity. And of course, Italy’s tax rules aren’t simple to begin with, so it is always a good idea to seek professional advice and assistance.

Here are a few things you’ll need to know about the process before you get started.

Which form will you need?

The first step happens to be less straightforward than you might hope.

In this article we’ll focus on the modello 730 (form 730), the newer and most commonly-used income tax return form, which most employees and retirees will need.

READ ALSO: The Italian tax calendar for 2023: Which taxes are due when?

But some people, including the self-employed, those with certain types of redditi diversi (sources of income other than employment or pension), and taxpayers who are not legally resident in Italy, might need to use the older form called the modello redditi persone fisiche instead.

It all depends on your personal circumstances, so if you’re unsure which form to use, speak to a tax professonal for advice.

The form 730 comes partially pre-filled with your personal details, which should make completing it somewhat more straightforward.

Tax season in Italy begins in mid-May.(Photo by ANDREAS SOLARO / AFP)

As tax expert Nicolò Bolla from Accounting Bolla explains on his website: “The 730 is a simplified form. It comes already filled in with your details courtesy of the Agenzia delle Entrate (Italian tax authority).

“So, when compared to the modello redditi, this form requires much less work on the part of the taxpayer. The details they provide can be changed, or not, which has its pros and cons.”

Where do you find this form?

You can download your personal 730 form from the Agenzia delle Entrate website.

You should find it already pre-compiled on a special section of the site HERE which you can log in to using your SPID (Sistema Pubblico dell’Identità Digitale) or CIE (electronic identity card) credentials.

The tax agency notes that “Italian citizens residing abroad who do not hold an Italian identification document may also use login credentials issued by the INPS (social security agency)”

READ ALSO: How to use your Italian ID card to access official services online

“You can view, edit and/or supplement your tax return within the service and then send it to the Agency.”

Unfortunately, while the Italian tax agency does have some information available online in English, the part of the website dealing with the 730 is only available in Italian, German, or Slovak.

How do you fill it out?

The form 730 can be filled out entirely online via the tax agency’s website.

According to the agency, the form should already contain “a number of automatically entered details, including deductions for health costs, university fees, insurance premiums, social security contributions, credit transfers for building renovation and energy renovation.”

As mentioned above, you may change the pre-filled details if necessary. But Bolla points out that there are some things to consider before you do:

“Changing a tax document does come with some risks, the primary one being that you become exposed to error which in turn means paying a penalty fee,” he says.

READ ALSO: The pros and cons of Italy’s five percent flat tax for freelancers

“The biggest benefit, perhaps, of not changing any information in the form is that you will not be subject to further tax checks, i.e. an audit.

“The 730 is considered changed if your alterations are related to the expenses that you have. When doing this it is recommended that you consult with an accountant to be sure of the conditions of a particular expense. It is always possible that you will have some tax deductible expenses that occur after the form is compiled by the revenue agency which will need to be added to the form.”

How and when do you submit it?

Once you or your accountant have filled in remaining details and made any necessary changes, or not, to the pre-filled sections, you can file your 730 online via the tax agency’s portal.

The deadline for submitting the completed form is October 2nd.

If instead you’re using the modello redditi PF the deadline for submitting this electronically is November 30th.

Should you ask an accountant for help?

All that famous red tape, plus the language barrier and a long list of tax-related acronyms, can make filing taxes in Italy a daunting proposition for foreign nationals. But you may be wondering whether hiring a commercialista (accountant) is worthwhile or necessary.

While the tax agency has tried to simplify the process, and even provides some Italian tax information in English, many Italians themselves Italians turn to their local tax assistance centre (Centro Assistenza Fiscale, or CAF) or hire a tax professional to take care of the process.

Getting professional advice is particularly important if you’re making changes to the pre-filled sections of the 730 or if you need to use the modello redditi PF.

See more information on the Italian tax agency’s website.

Please note that The Local cannot provide advice on tax issues. For help with filing taxes in Italy, contact your local tax assistance centre (Centro Assistenza Fiscale, or CAF) or consult an accountant (commercialista) or other qualified tax professional.