Foreign Assets Inheritance for Italians: Legal and Tax Planning
Initially, getting an inheritance could cause intense emotions, but negotiating the laws can be difficult. Italian residents who inherit assets from abroad face challenges due to major variations in local and foreign inheritance rules. Let’s have a quick look at the nuances of receiving foreign assets in Italy and delve into tax implications.
Understanding the Fundamentals of Italian Inheritance Law
The final will of the deceased is currently what determines inheritance law in Italy, regardless of the type of assets involved (movable or immovable). Unless the legacy says differently, heirs usually inherit jointly, dividing equally in both assets and obligations. This distinguishes heirs from legatees, who inherit certain assets and are shielded from the debts of the deceased unless the item is mortgaged.
It’s up to a Public Notary to oversee the opening of succession and the overall procedure, ensuring the validity of the testament as well as the compliance with mandatory provisions and public policy (e.g., legitimate portions, capacity to succeed and become heir, absence of succession pacts, prohibition of disinheritance, and so on).
The notary will distribute the assets following the interpretation of the decedent’s will. The legislation specifies the requirements for intestacy and apportionment in intestate succession situations. Public servants possess the power to complete the legal formalities in addition to notaries. In cases of intestacy, the law dictates the conditions and distribution. However, the EU Succession Regulation does provide considerable latitude. Under certain conditions, you may be able to use your own country’s inheritance laws to administer the estate planning.
Italian Inheritance Tax
Italy uses a civil legal system for Italian inheritance tax matters, which is a unique legal framework defined by codified statutes instead of common law principles. In Italian inheritance law, the “habitual residence” of the deceased—where they lived most of the time when they passed away—determines which rules apply to their estate. This is crucial for deciding inheritance matters.
Italy imposes an inheritance tax on assets located in Italy. This tax rate changes depending on the following factors:
- Your relationship to the deceased: Spouses, children, and other direct line descendants pay lesser taxes than more distant family members/relatives or non-relatives.
- The value of your inheritance: Larger inheritances are subject to higher tax brackets.
Italian Inheritance Tax Calculation
Even if each inheritance is calculated individually, we’ve included a brief outline of the main steps to follow:
First, you’ll need to determine the net taxable value of the estate. That means you have to:
- Sum the values of all assets in the estate (real estate, bank accounts, investments, etc.).
- Use fair market value or cadastral income (for real estate) as applicable.
- Subtract any debts, liabilities, funeral expenses, and allowable deductions from the total.
The next step will be the allowances application. Generally, it is done as follows:
- Spouse/Children: €1,000,000 per beneficiary is tax-free.
- Siblings: €100,000 per beneficiary is tax-free.
- Other Relatives (up to 4th degree): No tax-free allowance.
- Unrelated Beneficiaries: No tax-free allowance.
- Disabled Beneficiaries: Tax-free allowance of €1,500,000
So, the calculated tax based on relationship and taxable value will be as follows:
- Immediate family members:
| Spouse/Children | 4% on the portion exceeding the €1,000,000 allowance. |
| Siblings | 6% on the portion exceeding the €100,000 allowance. |
- Other
| Not immediate family members/ Other relatives | 6% on the entire taxable value. |
| Unrelated Beneficiaries | 8% on the entire taxable value |
To make things clear, let’s calculate the tax based on a specific example. Let’s say a deceased person leaves an Italian estate worth €800,000 to their only child. Net Taxable Value is €800,000 (no debts assumed in this example). An allowance of €1,000,000 applies. So, since the inheritance falls below the allowance, there is NO inheritance tax due.
Forced Heirship
According to Italian law, a portion of a deceased person’s assets must be kept for specific close relatives, regardless of what is indicated in the will. These protected relatives are referred to as “forced heirs.”
Forced heirship in Italy affects immediate family members such as spouses, children, and ascendants (parents, etc.). This means that even if a person makes a will, the provisions of forced heirship will prevail over any bequests that might reduce the reserved portions for protected heirs.
While the reserved portions of forced heirs are safeguarded, Italian law allows for compelled heir disinheritance (Diseredazione) in extremely specific and serious circumstances (for example, attempted murder of the deceased or severe abuse). Disinheritance requires a rigorous legal process.
Claiming Assets in Italy
Now, if you decide to claim your inheritance, you have a year to do it. If you fail to provide all the documents and submit the application within a year, you may face penalties. So, accepting a foreign inheritance while living in Italy requires some specific documentation, such as a death certificate of the deceased, and a will (if one exists). Here are the main steps you need to take when claiming a foreign asset living in Italy.
1. Start by formalizing the claim
Your claim starts with the Declaration of Succession (Dichiarazione di Successione) which serves as the critical document you’ll file with the Italian Tax Authority (Agenzia delle Entrate).
It officially declares that you have accepted the inheritance and includes details like:
- Information about the deceased and their estate
- A complete list of all heirs (specify their relationship to the deceased)
- Description and value of assets being inherited
- Calculation of any applicable inheritance taxes.
2. Transfer the assets
Next, you have to transfer the assets. The exact procedure for transferring assets will depend on the type of asset involved:
Real Estate:
- Notary Involvement
- Registration. The transfer of ownership needs to be registered with the Italian Land Registry.
- Bank Accounts/Financial Assets:
- Contacting the Institution
- Documentation. You’ll likely need to provide the death certificate, will (if applicable), Declaration of Succession, and proof of your identity as the heir.
Other Assets (Vehicles, Personal Property, etc.): Specific procedures might apply depending on the type of asset. Your lawyer can advise on the appropriate steps.
Depending on the country of residence where the inheritance originates, you might also owe taxes to their tax authority.
Dual Taxation
Italy charges inheritance taxes on Italian residents – regardless of where the inherited assets are located. The country where the deceased individual lived or where the assets are stored may additionally levy estate tax, inheritance, or gift taxes. This circumstance allows the identical assets to be taxed twice: once in the nation of origin and again in Italy.
The country where the deceased individual lived or where the assets are stored may additionally levy estate, inheritance, or gift taxes. This circumstance allows the identical assets to be taxed twice: once in the nation of origin and again in Italy.
Italy has double taxation treaties specifically addressing inheritance and estate taxes with numerous countries as:
| Region | Countries |
| Europe | Austria, Belgium, Bulgaria, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Russia, Slovakia, Spain, Sweden, Switzerland, Ukraine, United Kingdom |
| North America | Canada, United States |
| Asia | China, India, Israel, Japan, South Korea, Pakistan, Singapore |
| Rest of the World | Argentina, Australia, Brazil, Egypt, Mexico, Moldova, Morocco, New Zealand, San Marino, South Africa, Tunisia, Venezuela |
To sum up: how much taxes should I pay on my inheritance?
Being an Italian resident means having to deal with legal and tax issues when inheriting assets from overseas. It’s important to understand Italian inheritance laws, tax calculations, and asset transfer procedures. Risks of dual taxation may exist but can be lessened by Italy’s multiple taxation treaties. Ensure compliance with foreign currency laws when sending money or assets abroad. Non-financial assets like inherited property or artwork need to be carefully documented and valued for tax purposes. Getting experienced advice from tax and legal professionals guarantees a seamless cross-border inheritance process, protecting your foreign inheritance while you live in Italy.
Would you like read more about similar subjects? Check are related articles from here: Living (and Paying Taxes) in Italy with a Green Card, Property tax in Italy: The ultimate guide for 2024 and Tax Returns in Italy
