When it comes to inheritance tax, Italy currently enjoys somewhat of a “tax haven” status. These particular taxes are some of the lowest in Europe, with the maximum amount payable by an heir currently being 8% of the total value inherited. The percentages are calculated based on the relationship the heir has to the deceased; the spouse and children of the deceased are currently only liable for 4%, of any amount inherited over 1,000,000 Euro. This means that, in most succession cases in Italy, the heirs will not pay anything in inheritance taxes.
The Italian Government has recently, however, put forward a proposal to considerably increase these taxes.
Using the example above, if this proposal is approved, a spouse and children of the deceased would now be liable for 7% of any amount inherited above 400,000 Euro. Further, it is proposed that, if the value inherited is over 5 million Euro, the inheritance taxes charged to the heirs are further increased, reaching up to 45% of the total amount.
Despite these increases, Italy would still remain one of the European countries with the lowest inheritance taxes. If these changes are made, it would still be worth, however, considering whether a donation to the future heirs during one’s lifetime would be more favourable in terms of Estate Planning.
These increases are not yet definitive, and it is unclear when, and if, they will happen; Oliver & Partners will, of course, keep our clients informed of any definitive changes in Italian legislation and how they may be affected.