Inheritance Tax in Italy: Calculation and Payment
Have you received an inheritance in Italy and are unsure about how much inheritance tax you need to pay? You are in the right place. In this brief guide, we will explain what it entails. Before we begin, we remind you that you can consult this article on our blog to understand how succession works in Italy.
What is inheritance tax?
When you inherit movable property or real property rights in Italy, Italian law requires you to submit a declaration of succession and, if due, pay a tax (called inheritance tax) to the Italian Revenue Agency. For its exact calculation, as we will see, it’s necessary to quantify the total inheritance (sum of the value of real estate, real rights on real estate, securities, movable property, shareholdings, receivables, and all other properties of the deceased, followed by the subtraction of his liabilities, i.e., debts, etc.). In this way, you have the estate on which taxes (according to rates and exemptions provided case by case) are calculated.
The inheritance tax, therefore, applies to the transfer of ownership or other rights over movable and immovable property after the death of their owner.
If the active hereditary mass includes real estate or real property rights, it is always mandatory, first and foremost, to submit the declaration of succession within 1 year from the date of opening of the succession (usually coinciding with the date of the testator’s death).
When do you have to pay inheritance tax?
The tax on succession (and also on donations) is due for all inheritances (and donations between living persons), according to different rates and exemptions based on the degree of kinship between the testator and the heirs. In detail:
- For successions in favor of the spouse or direct relatives (children, grandchildren, parents, etc.), the rate is 4% of the received value (net of debts). But each beneficiary is entitled to an exemption of 1 million euros (i.e., they do not pay inheritance tax if the share of inheritance received is less than 1 million).
- For successions in favor of siblings, the rate is 6%, but there is an exemption of 100,000 euros.
- For successions in favor of other relatives up to the fourth degree, the rate is 6%, and there is no exemption.
- For successions in favor of other subjects, the rate is 8%, and there are no exemptions.
Note. The rates and exemptions just specified are applied to each individual beneficiary, not looking at the total value of the inheritance.
How is the inheritance tax paid?
The payment must be made using the F24 form, which will be attached to the communication from the Italian Revenue Agency, at the Agency for Revenue – Collection or at a bank/Post Office.
Which assets are excluded from inheritance tax in Italy?
The types of assets that are not taxed and, therefore, do not fall into the overall value of the inheritance (or donation) are:
- Italian government bonds or those of other European countries
- Businesses, business branches, or controlling shares in companies (if direct relatives or the spouse of the testator continue to carry out the activity for at least five years after the date of opening the succession)
- Severance indemnities and benefits paid by supplementary pension funds
- Vehicles registered in the Public Automobile Register
- Life insurance policies.
How is the inheritance tax calculated in Italy?
You must consider the taxable base, which is given by the difference between the total value of the active hereditary mass (at the date of opening the succession) and the value of the liabilities and deductible burdens. For the calculation, then, of the value of each individual share belonging to each heir, after defining the net amount of the hereditary estate, it’s necessary to divide the latter into shares.
The active hereditary mass may contain: real estate/real property rights, businesses, shares and bonds, social shares, annuities/pensions, receivables. There may also be cash, jewelry, and furniture, but for an amount equal to 10% of the global net taxable value of the hereditary estate (even if not declared or declared for a lesser amount, unless the inventory shows the existence of a different amount).
Deductible liabilities, instead, may include: the testator’s debts, medical and funeral expenses (the latter within the limit of 1,032.91 euros, i.e., the maximum tax deduction threshold available), possible taxes paid in a foreign country in relation to the same succession.
Note. For real estate inherited in full ownership, the taxable base for calculating the inheritance tax depends on their cadastral income (with a revaluation of 5%) multiplied according to these coefficients:
- 110 if primary residence
- 120 if the buildings belong to cadastral groups A and C (excluding A/10 and C/1)
- 140 if the buildings belong to the cadastral group B
- 60 for buildings in categories A/10 (e.g., office and private study) and D
- 40.80 for buildings in categories C/1 (e.g., shop and workshop) and E.
In the case of non-building land, the taxable value is given by multiplying by 90 the cadastral income, already revalued by 25%.
If the active hereditary mass includes real estate and real property rights, it’s mandatory to pay mortgage and cadastral taxes, in the amount of 2% and 1% of the value of the properties. The minimum amount is 200 euros for each tax. The measure of 200 euros is fixed if the heir has the necessary requirements to benefit from the first home benefits.
Who must submit the declaration of succession in Italy?
As provided by articles 28 and 29 of Legislative Decree No. 346 of 1990, those obliged to present the declaration of succession are: the heirs, those called to the inheritance, the legatees, the administrators of the inheritance, the curators, the executor of the will, the trusts.
If for the same succession, there are multiple subjects obliged to present the declaration of succession, it’s sufficient that just one of them presents it.
When is there an exemption from presenting the declaration of succession in Italy?
Subjects exempt from paying inheritance tax are, primarily, those called to the inheritance or the legatees who renounce the inheritance or the legacy before the expiration of the term to present the declaration of succession. Secondly, they are the direct heirs, legal representatives, or involved subjects who, not being in possession of the inherited assets, have arranged for the appointment of a curator of the inheritance.
Thirdly, there is no obligation to present the declaration of succession if these three conditions occur simultaneously:
- The inheritance is transmitted to the spouse or direct relatives of the testator
- The active hereditary mass is not more than 100,000 euros
- There are no real estate or rights on real estate.
How is the declaration of succession presented?
According to articles 28 and 31 of Legislative Decree No. 346 of 1990, the declaration of succession must be presented to the Italian Revenue Office in whose jurisdiction the testator’s last residence was established, within one year from the opening of the succession (usually coinciding with the date of death).
In case of residence abroad of the testator, the competent Financial Office is the one in whose jurisdiction his last Italian residence was established. If this is not known, according to art. 15 paragraph 2 of Law No. 383 of 2001, the competent Office is that of Rome (Office of Rome 6, today Provincial Directorate II of ROME – Territorial Office ROME 6).
Note. Within 30 days of presenting the declaration of succession, the request for the transfer of real estate to the Provincial Offices – Territory of the Revenue Agency must also be presented.
If you want to compile the declaration of succession independently, you must download form 4 from the website or at the offices of the Revenue Agency. It must be signed by at least one of the obligated parties or a negotiating representative. The following must be indicated:
- The testator’s data
- The testator’s family tree to select the heirs
- The heirs’ data and kinship relations
- Transferable real estate, identified with cadastral details
- The testator’s stocks, securities, and businesses
- Donations made by the testator during his lifetime
- The testator’s debts
If necessary, death certificates or those on family status and residence can be replaced with substitute declarations of certification (art. 46 of DPR No. 445 of 2000).
What is the supplementary or substitute declaration of succession?
In the event that, after presenting the declaration of succession, an event occurs that changes the devolution of the inheritance or the legacy, or leads to the application of a higher tax, the obligated subjects must present a supplementary or substitute declaration (art. 28 paragraph 6 of Legislative Decree No. 346 of 1990).
What happens if the declaration of succession is not submitted?
If the declaration of succession or the supplementary/substitute declaration is not submitted, according to Article 50 of Legislative Decree No. 346 of 1990, a fine is imposed ranging from 120% to 240% of the tax assessed or reassessed officially.
If no tax is due, an administrative fine ranging from 250 to 1,000 euros is applied.
However, if there is only a delay in submitting the declaration (not exceeding 30 days), an administrative fine from 60% to 120% of the amount of the tax assessed or reassessed by the Office is imposed. Unless there is a voluntary correction; in fact, Article 13, paragraph 1, letter c) of Legislative Decree No. 472 of 1990, provides that the penalty for failing to submit the declaration is reduced to 1/10 of the minimum if the delay does not exceed 90 days. Moreover, the declaration submitted within the deadline can be supplemented, benefiting from a reduction of penalties in relation to the delay (1/9 of the minimum if regularized within 90 days, 1/8 of the minimum within 1 year, 1/7 of the minimum within 2 years, 1/6 of the minimum after 2 years).
What happens in the case of an unfaithful declaration of succession?
Article 51, paragraph 1 of Legislative Decree No. 346 of 1990 provides a penalty from 100% to 200% of the tax difference in case of:
- Omission of the indication of data or elements relevant for the assessment or reassessment of the tax or unfaithful indication (with values not adhering to reality)
- Indication of liabilities that are wholly or partly non-existent
- Issuance or subscription of attestations or other documents relevant for the identification of deductible liabilities containing untruthful data or elements.
Payment Methods
The settlement of the inheritance tax by the Revenue Agency is carried out based on the declaration submitted by the heirs. We talk about self-assessment of taxes (according to Ministerial Decree 21.5.97), only for mortgage, land registry, and stamp duties due at the time of succession. The payment of these can be made through the F24 form or by direct debit. Payment in installments is also possible:
- At least 20% of the amount must be paid within 60 days from the notification of the assessment notice
- The remainder must be paid in 8 quarterly installments (12 if the amount is over 20,000 euros), with interest calculated from the first day after the initial payment.
In case of transfer of the primary residence?
To benefit from the exemption, the heir or at least one of the beneficiaries (if there are multiple) must meet the “primary residence” requirements (Article 1, paragraph 1 of the Tariff, Part I, attached to Presidential Decree No. 131 of 1986) and submit the declarations provided by note II-bis to Article 1.
The mortgage and land registry taxes will be due in a fixed amount (200 euros for the mortgage and 200 euros for the land registry).
The inheritance tax, however, will still be due in the ordinary amount.
Conclusions
We hope to have clarified the most important steps on how to calculate the inheritance tax. If you need to quickly unlock a bank account or a property and do not want to do it independently to avoid waiting months or making mistakes, you can turn to one of our Italian lawyers specialized in succession matters.
