Italian inheritance taxes overview - YouTube

Italy is a sort of tax heaven

for inheritance tax purposes, and this is due for multiple reasons.

First of all, the Italian inheritance tax rates are very low and most of the assets

do not fall within the inheritance tax area.

So, first of all, let me explain to you, which are the different tax rates.

First of all, we have a four percent tax

rate, which is for your spouse and any lineal descendants.

So your sons and your grandsons, they all pay four percent.

But there is a nil rate band of one million

euros per person, which means that if you have three sons,

three daughters, well, in that case, your nil rate band is three million.

So any estate up to three million, you do not pay any inheritance tax.

Now, if you go to brothers and sisters or to family members up to the third degree,

then there is the six percent inheritance tax.

However, brothers and sisters have

a nil rate band of one thousand, one hundred thousand euros each.

And finally,

any other person or organization pays an eight percent inheritance tax.

This is the highest you can pay.

You cannot pay more than eight percent.

And if the recipient is a disabled individual, well, in that case,

the nil rate band is increased to 1.5 million.

If it is a lineal descendant or two

hundred thousand euros if it's a brother or a sister.

Now, then it makes sense to understand on what amount you pay that tax,

because not only you have very generous nil rate band and very low tax rates,

but you also have many items that fall outside of the estate.

And by the way,

when I refer to inheritance tax, I also refer to donation tax,

which should be paid on any donation done during the lifetime.

And it's very important to understand this concept.

So what falls outside, outside of the chargeable estate?

So which items

you do not pay any, zero inheritance tax on that?

So the most common examples are

partnerships and unquoted shares in trading and holding company.

So let's say that you have a billion euro company but it's private,

it's not listed on any market, that falls outside of the estate.

It doesn't matter who you donate

that to, it's just not part of your chargeable estate.

Also, government bonds.

If you hold government bonds, they fall outside of your estate.

You do not pay any tax.

If you have five million euros of government bonds,

you do not pay anything because the chargeable estate of that is zero.

And also you do not pay any inheritance tax on life insurances.

They fall outside of your estate as well.

So if you think about that, what else is left?

Well, basically what is left is cash,

is listed shares and investment portfolio, and real estate.

However, real estate, what's the actual value?

So the value is not the market value of the property and it's not the amount

of money the property is worth, but it's the cadastral value.

And once again, there's a formula to determine that.

And the formula is based on the cadastral value.

So you have cadastral value times 120 times 1.05,

that's the value of the property for inheritance tax purposes.

So if that property is worth a million,

but on the cadastral paper,

on the land rights of papers it's worth two hundred thousand,

that's the value of the estate.

So tax is chargeable on that.

But of course, you also have to remember

that whenever there is a transfer after death, you have to consider A) inheritance

taxes and B) any transfer taxes, most notably the rights or tax.

So whenever you change the name

on the registered assets, on the rights of property, you have to pay that. So for instance,

when you transfer shares, you pay 200 euros.

But when you transfer property,

depending if you like that as your main residency or not, you can pay a variable

rates of tax from two percent up to nine percent.

However, you end up not paying much taxes. So,

despite that, it is still likely that you

might pay tax. So what you can do to avoid that?

Well, you need to do some estate planning and some estate planning might also

consider incorporating your chargeable assets into a partnership or a società

semplice, which is the easiest form of partnership.

But if you think about that,

if you own a large investment portfolio and that falls outside of the minimum

of the nil rate band, you have to pay inheritance tax on that.

But if those assets are into a partnership or a corporation and then you transfer

those shares or the, or your partnership value, that falls outside of your estate.

So this is a basic strategy to reduce any

possible outgoing foreign inheritance taxes.