Your family is in three countries. Your estate plan assumes one.

Italian inheritance tax follows residence and reaches worldwide. The rates are gentle by European standards — the coordination is not.

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How Italy taxes an estate

Italian inheritance and gift tax is, by European standards, unusually mild — which is precisely why it is so often ignored until it is too late to plan.

  • Spouse and children: 4%, with an allowance of one million euro per beneficiary.
  • Siblings: 6%, with an allowance of 100,000 euro per beneficiary.
  • Other relatives to the fourth degree: 6%, no allowance.
  • Everyone else: 8%, no allowance.

The reach depends on residence. If the deceased was resident in Italy, the tax applies to assets wherever in the world they are situated. If not resident, only assets located in Italy are caught.

That single distinction is what turns a modest Italian tax into a significant one, and it is decided by the same residence rules that govern income tax.

The law governing your succession is not the tax that applies

These are two different questions, and conflating them is the most common structural error I encounter.

Under the EU Succession Regulation, the law governing your succession is by default that of your habitual residence at death — but you may elect the law of your nationality instead, by a declaration in your will. For someone from a common-law country that election can be decisive, because Italian law imposes forced heirship: a reserved share for the spouse and children that cannot be freely disposed of.

What the election does not do is change the tax. Choosing English or New York law to govern your estate leaves Italian inheritance tax exactly where it was. You can change who inherits; you cannot change who taxes.

A will drafted abroad, without an express choice of law, can distribute an Italian estate in a way its author never intended.

Where structures stop behaving as expected

  • Trusts. Italy has no domestic trust law but recognises foreign trusts. Treatment depends heavily on whether the trust is genuinely discretionary and on where settlor and beneficiaries reside. A trust that worked cleanly elsewhere can become transparent, or taxable, once an Italian resident appears in it.
  • Holding companies. Shares in a foreign holding are an asset of the estate. Whether the underlying assets or the shares are valued, and where, changes the outcome materially.
  • Life policies and pension pots. These often sit outside the estate in the country of origin and are treated differently in Italy. Worth checking rather than assuming.
  • Real property. Immovable assets follow their own rules and, under several treaties, remain taxable where they are located regardless of everything else.

Italy also has very few inheritance tax treaties — a short list including France, the United Kingdom, the United States and a handful of others. Outside them, relief from double taxation depends on domestic credit rules, which are narrower than most people expect.

The book behind this page

The Italian Jungle — coming soon

Wealth & Tax Strategy in Italy

Investments, Succession, Holdings and the Neo-Resident Regimes

The fifth volume of The Italian Jungle deals with protecting and passing on wealth in Italy: how investments are taxed, how succession works across borders, when a holding or a trust earns its keep, and how the neo-resident regimes change the picture. Leave your email and I will tell you the moment it is out.

Frequently asked questions

Does Italy tax my worldwide estate?

If the deceased was resident in Italy, yes: inheritance tax reaches assets wherever situated. If not resident, only Italian-situated assets are caught.

What are the Italian inheritance tax rates?

4% for spouse and children with a one million euro allowance each, 6% for siblings with a 100,000 euro allowance, 6% for other relatives to the fourth degree, and 8% for everyone else, both without allowance.

Can I choose the law of my own country for my succession?

Under the EU Succession Regulation you may elect the law of your nationality by declaration in your will. This governs who inherits, but it does not change which country taxes the estate.

What is forced heirship and does it apply to me?

Italian law reserves a share of the estate for the spouse and children, which cannot be freely disposed of. It applies where Italian law governs the succession, which is why an express choice of law matters.

Will my foreign trust still work if I move to Italy?

It may, but its treatment changes. Italy recognises foreign trusts, and the outcome depends on whether the trust is genuinely discretionary and on where settlor and beneficiaries reside. It should be reviewed before the move.

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