The inheritance tax is a fee that does apply to assets received in the context of succession and inheritance. The original purpose of such tax was the promotion of social mobility while encouraging the redistribution of wealth.
During the last century, the Italian inheritance tax has been modified several times. From a rate of 3% to 33% in 1990 to the 4% – 8% in 2000 to its removal occurred during Berlusconi Government and to its current rate that sees an inheritance fee with rates ranging from 4% to 8%.
Today, the relatives in direct line with the deceased who receive heritage up to EUR 1 Million are not required to pay anything. Beyond the previous amount, they will pay 4%. Brother and sisters of the deceased will not pay anything up to EUR 100.000.00 However, beyond such amount the rate is 6%. The same amount is paid by uncles, aunts, brothers, and sisters in law till the fourth grade of family relationship, but on the whole inheritance.
According to the Italian system, there are several assets and income that are exempted from inheritance tax. For instance, Governmental Bonds, companies and company branches, controlling stakes of companies et cetera. In fact, the Italian Inheritance Tax is one of the lowest taxation in Europe. For this reason, it has been proposed to raise the inheritance rate to 20% for those assets beyond EURO 5.000.000.00 to redistribute the income to eighteen-year-old within economic condition caused the pandemic crisis.
European Inheritance fees and rates are higher compared to the Italian one. For instance, in the event of a EUR 1.000.000.00 estate, the Italian and American heirs would pay nothing. In Spain, the heirs would pay around EUR 335.000.00, in France, the amount would be EUR 270.000.00, in the UK EUR 245.000.00 and in Germany 115.000.00. The consequence of such different taxation is shown by the different tax incomes of previous states concerning inheritance. In 2018, Italy’s inheritance tax income amounted to EUR 820 Million. In the UK, for the same period, the tax income amounted to EUR 5.9 Billion and EUR 14.3 Billion in France.
The OECD’s Inheritance Taxation in OECD Countries revealed that Italy and the US have the highest tax exemptions in the world. In Countries like France, Belgium, Japan the inheritance tax amounts to 1% of the total taxable income. In UK and Ireland, the inheritance tax covers 0,7% of the total taxable income. Then Germany, Spain, and the US stop at 0,5%. Italy’s inheritance tax, however, barely reaches 0,2% of the total taxable income.
Under these circumstances, it is inevitable how the unfair concentration of personal wealth in Italy also has been caused by unfair inheritance tax rates.
Should you need any advice or assistance in inheritance tax matters, please do not hesitate to contact us through the form you can find on this page. VGS professionals will get back to you within the next 24 hours.