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By:  Marco Salvatore and Francesco Luigi De Luca
Studio Legale e Tributario F. De Luca
Milan, Italy

Italian inheritance and gift tax system might undergo major amendments in the next year. According to news rumors, Italian government is planning to amend allowances and rates for inheritance and gift tax as follows:

  1. in case the beneficiary is a direct descendant, the husband and wife: allowance reduced from € 1 million to € 300,000 for each heir , tax rate increased from current 4% to 6%;
  2. in case the beneficiary is a sibling: allowance reduced from € 100,000 to € 50,000 for each person, tax rate increased from 6% to 8%;
  3. in case the beneficiary is a relative up to the 4th degree or relatives-in-law up to the 3rd degree: tax rate increased from 6% to 10% for each person;
  4. Other beneficiaries: 10% for each person.

According to the Italian law, the taxable base is computed in different ways depending on the type of asset considered.

The taxable base of real estate is determined on the basis of the cadastral value, which is a nominal value attributed to the real estate by the land registry (usually, this value is far lower than the actual market value).

The taxable base of participation is (i) the net worth as reported in the last approved balance sheet or (ii) the last three-month average market value, if the corporation is quoted on the stock market. Should the transfer of the participation involve the transfer of the control of the corporation, no taxes are due, provided that the participation is jointly transferred to all the beneficiaries.  Assets held abroad and owned by an individual who is resident abroad are exempt from Italian inheritance and gift tax. However, should the assets located in Italy, even if held by a an individual who is resident abroad, Italian inheritance and gift taxes are levied. Moreover, participation in corporation tax resident in Italy is subject to the Italian inheritance and gift tax.

If the above reported modifications will come true, coupled with a reform of the land registry (that will increase the cadastral values), inheritance and gift tax burden shall likely increase significantly.

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