Inheritance and gift tax

Foreigners living in Italy and owners of property in Italy are not automatically subject to Italian inheritance and gift law, since residence and the location of the inherited or gifted assets are irrelevant. What matters is the nationality of the deceased or donor. If the person is Italian, Italian inheritance law applies. 

If not, succession is governed by the inheritance law of their home country.Under Italian inheritance and gift law, spouses, children, and grandchildren are entitled to a tax-free allowance of €1 million. Beyond this threshold, a fixed tax rate of 4% applies. In the case of inheritance or gifts of real estate, in addition to inheritance or gift tax, the heir or recipient must also pay a mortgage tax of 2% and a cadastral tax of 1%. 

The tax base for all three rates is always the cadastral value of the property. If the inherited or gifted property is registered as a primary residence, both the mortgage and cadastral tax are reduced to €168 each.According to Italian law, all assets inherited or received as a gift are subject to inheritance or gift tax, regardless of whether they are located in Italy or abroad. 

If the deceased or donor is only partially subject to Italian taxation, because their primary residence is abroad, then only assets located in Italy are taxed in Italy. In this context, it is important to check whether Italy has a double taxation agreement with your home country; otherwise, heirs or recipients may face double taxation.Within six months of accepting the inheritance or gift, the heirs or recipients must file an inheritance or gift tax return with the competent tax office. 

This is particularly essential if the inherited property is to be sold later.