Dr Claudio Del Giudice
82 Great Eastern Street,
London EC2A 3JF
Tel 0044 207 613 2788
Fax 0044 207 613 2799
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Father Christmas (Santa Claus) was three
days late in Italy this year, at least as far as Italian Inheritance Tax
is concerned. On the 28th December 2006 the Italian Parliament
eventually passed the final version 2007 Budget Law (Finanziaria 2007)
which among other, totally unrelated matters substantially improves
Italian Inheritance Tax (Imposta di Successione), from the
taxpayer's point of view.
The background is that after an absence of nearly five years from Italy,
Inheritance Tax was reintroduced first in a virtual form (by reference
to another tax already in existence) last July, and then by formally
re-introducing the earlier law (previously abolished) with some changes
last October. Thus, to a certain extent, the actual charge under this
tax will depend on the actual date of the death in question.
Finanziaria 2007 has now consolidated this tax in Italy, in its
permanent version, at least for the foreseeable future and applies to
all Estates where the death occurred on or after the 3rd October 2006.
Compared with its equivalent in the UK (where Inheritance Tax is levied
at the flat rate of 40%), Italian Inheritance Tax is very generous.
The new Italian Inheritance Tax is now levied at three different flat
rates, on the whole or part estate of the Deceased with reference to the
beneficiaries entitled, as follows:
- At the rate of 4% where the Estate or part of the Estate devolves to
the Deceased's spouse or children, subject to an exempt amount for each
beneficiary of Euro 1,000,000 each (which at current exchange
rates is equivalent to an exempt slice of £ 657,800 for the spouse and
each of the children) (the so called "Franchigia"). Thus
in the case of a widow and three children any Estate up to £ 2,631,000
would not be taxed at all, and
- 6% where the Estate or part of the Estate devolves to brothers or
sisters (subject to an exempt amount of Euro 100,000 each) and to
other relatives of the Deceased up to the 4th degree (without any
"exempt amount"), and
-8% where the Estate or part of the Estate devolves to unrelated
Where the Estate or part of the Estate devolves to one or more disabled
children, the exempt amount is increased to Euro 1,500,000 (£ 986,800 at
the current rate of exchange). This in practice means that the small /
medium Estates are not subject to Inheritance tax in Italy.
In addition, Finanziaria 2007 now states that where the Estate
includes a business or a substantial shareholding in a company, whatever
their amount, they are not taxed on death if they pass to the children
of the Deceased, and the said children undertake to continue to carry on
the business or control the company for at least 5 years.
The rationale behind this generous legislation is that the Italian
taxman has decided not to endanger the family home on the death of the
breadwinner, a most critical time in any family. Also because small /
medium businesses are the backbone of the Italian economy this new
legislation attempts to avoid the break up of viable businesses on the
death of the founder / proprietor.
In any case and whatever the reasons, Italian Inheritance Tax is now
extremely generous and only the largest Estates are now exposed to tax
on death. For foreign / non resident owners of Italian properties, it
will probably mean that the Italian cottage / villa will not be taxed in
Italy on death.
Although a fairly complex probate and succession procedure has now been
reintroduced, other taxes have now recently increased, in a way Italy is
an Inheritance Tax haven. As things stand at the moment, Italy is the
ideal place to invest and retire, for the benefit of future generations.
Avv. Claudio Del Giudice
(Avvocato & Solicitor)
Copyrights reserved - January 2007