Do you have to pay inheritance tax on an estate in Italy?
It depends on the family relationship, the value received by each heir and the deceased’s residence. In Italy, a spouse and relatives in the direct line benefit from an individual EUR 1,000,000 allowance. As a general rule, only the amount exceeding that allowance is taxed, at 4%.
It is therefore inaccurate to state generally that “inheritances below EUR 1 million are tax-free in Italy”. The EUR 1 million allowance applies per beneficiary and only to certain family relationships. In addition, estates that include real estate may trigger other taxes and costs even where no Italian inheritance tax is due.
How does the EUR 1,000,000 allowance work in Italy?
Italian law provides a 4% inheritance tax rate for spouses and relatives in the direct line – such as parents, children, grandparents and grandchildren – on the net value received by each beneficiary above EUR 1,000,000.
The allowance is individual. It is not calculated on the overall value of the estate, but on the share passing to each heir.
Practical example
If a father dies leaving a net estate of EUR 1,800,000 to two children in equal shares, each child receives EUR 900,000. Because each individual acquisition is below the EUR 1,000,000 allowance, in principle neither child would have Italian inheritance tax to pay on that acquisition.
If, instead, one child inherits EUR 1,500,000, the first EUR 1,000,000 is covered by the allowance. The 4% rate applies to the remaining EUR 500,000, producing a EUR 20,000 tax liability, without prejudice to any other taxes or circumstances that may need to be considered.
Rates and allowances according to family relationship
The tax treatment changes depending on the relationship between the deceased and the beneficiary:
- Spouse and relatives in the direct line: 4% on the amount exceeding EUR 1,000,000 per beneficiary.
- Brothers and sisters: 6% on the amount exceeding EUR 100,000 per beneficiary.
- Other relatives up to the fourth degree and certain relatives by affinity: 6%, without the EUR 1 million allowance.
- Other beneficiaries: 8%.
- Persons with a severe disability recognised under Italian law: an allowance of up to EUR 1,500,000.
When can Italy tax an inheritance?
The deceased’s residence is central to the territorial scope of Italian inheritance tax. If the deceased was resident in Italy when the succession opened, Italian tax may generally apply to the transferred assets and rights even if they are located outside Italy. If the deceased was not resident in Italy, Italian tax is generally limited to assets and rights treated as situated in Italy.
This distinction matters in cross-border estates because bank accounts, real estate, company interests and other assets may be treated differently depending on their nature and location.
An estate below EUR 1 million may still trigger other taxes
A nil inheritance tax liability does not mean that the transfer is free from all taxes and costs. Where the estate includes real estate in Italy, mortgage registration and cadastral taxes, as well as the costs and formalities required to update land and property records, must also be reviewed.
The analysis should therefore separate two questions: the amount of Italian inheritance tax payable and the other taxes or costs arising from the transfer of each asset.
The Italian succession declaration: deadline and self-assessment
The fact that no inheritance tax is payable does not automatically remove filing obligations. The dichiarazione di successione must be considered separately and, as a general rule, must be filed within 12 months from the opening of the succession.
The reform introduced by Italian Legislative Decree No. 139 of 18 September 2024, generally applicable to successions opened from 1 January 2025, strengthened the self-assessment system for inheritance tax. Correctly determining asset values, applicable allowances and related taxes before filing is therefore particularly important.
What if you inherit assets in Italy but live in Spain?
If you are tax resident in Spain, the inheritance may also have Spanish tax consequences. Under the Spanish Inheritance and Gift Tax Act, individuals who are habitually resident in Spain are subject to tax on a personal obligation basis regardless of where the inherited assets or rights are located.
An inheritance involving Italian assets therefore cannot be analysed solely from the Italian perspective. Spanish taxation must also be considered and, where a similar tax has been paid abroad, the Spanish rules on relief for international double taxation may apply, subject to the statutory limits.
Spain-Italy estates: what should be reviewed?
In a succession involving both Spain and Italy, the following should be identified from the outset:
- The deceased’s residence and the tax residence of each heir.
- The family relationship between the deceased and each beneficiary.
- The location and nature of all assets, including real estate, bank accounts, investments and company interests.
- Filing and payment obligations in Italy and Spain.
- The possible application of mechanisms intended to prevent economic double taxation.
Cross-border estate taxation should not be reviewed country by country in isolation. Before distributing assets or filing tax returns, it is advisable to establish the full composition of the estate and coordinate the procedures required in both jurisdictions.
Legal advice on inheritances between Spain and Italy
Martínez Lafuente Abogados advises on and coordinates international estates involving assets or heirs in Spain and Italy, working with Italian professionals where their involvement is required.
If you have inherited real estate, a bank account or other assets in Italy, or you are administering from Spain an estate with Italian assets, we can review the matter as a whole to identify the succession and tax obligations in both countries and reduce the risk of duplication or errors in the reporting of assets.