Ever wonder how much Inheritance Tax is on Italian Real Estate?
Purchasing a home in Italy certainly has its upsides; vacations near the sea or mountains, impeccable wine and cuisine, and countless historic villages to explore. You probably don’t want to be the only one enjoying these treasures, and inviting family over to experience Italy’s “La Dolce Vita” is an important aspect of purchasing. Plenty of retirees hope their children and grandchildren will visit them in their new home and fall in love with the country as they have.
How Much are Inheritance Taxes on Italian Real Estate
While it might not be one of the first things you consider when buying a home, knowledge surrounding property succession in Italy will come in handy down the road. Regardless of where the homeowner resided upon passing, inheritance taxes are owed on all real estate properties within the Italian territory.
This may not sound ideal, but inheritance taxes in Italy are surprisingly low. In fact, there is only a 2% mortgage tax (“imposta ipotecaria”) and a 1% cadastral tax (“imposta catastale”), for a total of 3%. These two taxes are calculated on the fiscal value, which is generally much lower than the actual value of the property, so effectively the total taxes are 1% or even less!
Italy's Tax Incentives on Homeownership
Individuals may claim the “First Home Bonus” on an inherited property, wherein the mortgage tax and cadastral tax previously mentioned become a mere €200 each. This is contingent upon residing in the city where the inherited property is located, or for the beneficiary to commit to transferring their residency within 18 months. If they’re already an Italian passport holder though, even if they live abroad, they may claim the “First Home Bonus” on an inherited property without needing to move.
In general, inheritances taxes in Italy are not high, and certainly shouldn’t deter you from purchasing property for yourself and your descendants. It’s even common in Italy to donate the bare ownership of a property to your children and keep the use of the property or “usufruct” for yourself. If you’re ready to buy a home in Italy and make life better for yourself and generations to come, contact us to start property scouting for you and find you your dream home.
How much are Italy's Inheritance Taxes on Money
Along with real estate, it’s possible that you pass along other assets of your estate. Italy’s inheritance taxes are among the most favourable in Europe; and when it comes to money, the taxes range between 4% to 8% of the departed’s worldwide assets. In most cases, however, the taxes are not applicable.
Italy has a 1 million euro deductible for each family member on a straight line including the spouse, along with the children and grandchildren. For amounts exceeding 1 million, the tax due would be 4%. The deductible rises to 1.5 million, though, if the heir is disabled.
For brothers and sisters of the departed, the deductible is 100 thousand euros, with a 6% tax due beyond that. For other relatives up to the 4th degree, there is no deductible and the taxation is 6%. For any other designated heir, the tax rate is 8%.
For a quick example, let’s assume a British or American citizen who resides in Italy leaves behind 3 million Euro. He is survived by his wife and 2 children as heirs, and with the small fortune shared equally among them, they each receive 1 million euros, so no taxes are due.
If instead, the fortune is €4 million, they each would get ⅓ or 1.33 million. After the deductible, each heir would pay 4% on the surplus, so a little over 13 thousand euros; a modest sum for such a large inheritance.
If you’d like us to put you in touch with an estate planning professional in Italy, or assist you with acquiring or selling a property here, contact us here.