ALL YOU NEED TO KNOW ABOUT ITALIAN INHERITANCE TAX.

Italian Inheritance Tax (IIT), called “Imposta sulle Successioni e Donazioni”, has had a chequered life, was abolished, replaced by other taxes, re-introduced and then resurrected and amended.

In its current form is applicable to all successions / deaths occurring after the 3rd October 2006.

IIT is applied to the whole, world-wide Estate where the Deceased was resident in Italy at the time of death. It will only apply to the Italian assets, if the Deceased was not resident in Italy. Care should be taken to consult specialized professionals, as between Italy and the United Kingdom a rather old Treaty for the avoidance of Double Taxation of Estates, is still in force.

Basically there are three rates of IIT. These rates are applicable on the value of the assets transferred to each individual beneficiary, depending to the degree of relationship to the Deceased:

4% for all transfers on death to the surviving spouse and children, subject to a “nil rate band” of Euro 1,000,000 for each beneficiary

6% for all transfers to relatives within the fourth degree of relationship to the Deceased, and other relative on the spouse side up to the third degree (no exempt amount is available)

8% for all transfers on death to any other (unrelated) parties.

Where the Estate includes immovable property, that is, Italian land or buildings additional taxes (Imposte Ipotecarie e Catastali) are also payable, normally at the rate of 3%.

A provision in the text of IIT prevents any legal transfer / disposal of assets included in the Estate of a Deceased, until an Italian Inheritance Tax Return (Dichiarazione di Successione) has been lodged with the Authorities. This will usually mean, for instance, that in the case of Italian bank accounts, the banks will “freeze” the Italian account until an Inheritance Tax Return has been duly lodged, and documentary evidence has been produced to the bank.

It is very important to note that an Italian Inheritance Tax Return should usually be lodged with the Italian tax Authorities within one year from the death of the Deceased. In default, interests and penalties are normally, applicable.

Because of the “nil rate band” applicable to most successions (where the Estate is transferred to the immediate family of the Deceased) no IIT will actually be payable in Italy, in most cases.

However, an Italian Inheritance Tax Return should always be lodged with the Italian Authorities and small amounts of other taxes will be payable, especially where an Italian property is involved. In very rare cases it is possible to dispense with the lodging of a return, in Italy but this will not apply where the Estate includes Italian real estate. Lodging an IIT Return and paying any Italian taxes due, is an essential part of the procedure to get the legal title to any Italian property re-registered in the names of the beneficiaries of the Estate of any Deceased.

Because of the detail of information and of the  copious documentation to be filed with the Italian Inheritance Tax Returns, it may take quite some time to organize this formality. The procedure is more complex where the Deceased was a foreign national / non resident.

It is advisable to start collating all the required information and documentation as soon as possible, to avoid last minute panic !

Copyrights reserved, 09.07.2010

Dr Claudio Del Giudice