Living abroad is often believed to protect an heir from Italian taxation when an inheritance is received. In reality, the position is different and depends on a few concrete factors: the residence of the deceased, the location of the assets and the degree of relationship with the person leaving the estate. Here, in an orderly way and with some figures, is how inheritance tax works for heirs living outside Italy and which mistakes should be avoided in order not to pay more than is due.
Inheritance tax for heirs living abroad: who pays and where
Anyone living abroad who inherits a house or a bank account in Italy almost immediately asks a practical question, sometimes with a certain degree of anxiety: will I have to pay tax in Italy? And also in the country where I live? The concern is understandable, but the answer is more structured than it may initially appear. Inheritance tax for heirs living abroad does not primarily depend on where the heir lives, but on two different factors: where the deceased was resident and where the assets are located.
This point should be made clear from the outset because it overturns a common assumption. Many people believe that living outside Italy means that Italian inheritance tax does not apply to them. This is not the case. Inheritance tax looks at the position of the deceased and the location of the estate, not at the residence of the person inheriting. If there is a property or a bank account in Italy, that asset falls within the scope of Italian taxation regardless of the country in which the heir lives.
The other relevant factor is the residence of the deceased. If the deceased was resident in Italy, Italian inheritance tax applies to the entire estate, wherever the assets are located. If the deceased was resident abroad, only assets situated in Italy are taxed in Italy. These are two scenarios with very different consequences, and understanding which one applies is the first step towards calculating the tax correctly.
In our experience, it is precisely the confusion between the heir’s residence and the deceased’s residence that leads to incorrect calculations and unpleasant surprises. Clarifying from the outset who pays, where and on which assets prevents the entire declaration from being structured incorrectly.
Inheritance tax for non residents: the rules
Let us now consider the rules in more detail. When discussing inheritance tax for non residents, it is once again necessary to distinguish between the position of the deceased and that of the heir. If the deceased was not resident in Italy, Italian inheritance tax applies exclusively to assets and rights located within the territory of the State. The rest of the estate, situated elsewhere, falls outside the scope of Italian taxation.
Once the assets taxable in Italy have been identified, the calculation follows the same rules applicable to everyone. The rates and allowances do not change according to the heir’s residence, but depend on the relationship with the deceased. A spouse and direct descendants or ascendants, such as children, are subject to a rate of 4 per cent on the value exceeding one million euros for each beneficiary. Brothers and sisters pay 6 per cent on the amount exceeding one hundred thousand euros each. Other relatives up to the fourth degree and relatives by marriage within the statutory limits are subject to a rate of 6 per cent without any allowance, while all other beneficiaries are subject to a rate of 8 per cent. For an heir with a recognised serious disability, the exempt threshold rises to one million five hundred thousand euros. An example makes the calculation clearer: a child who inherits from their father a property in Italy worth 1.3 million euros applies the 4 per cent rate to the 300,000 euros exceeding the one million euro allowance and therefore pays 12,000 euros in inheritance tax. If the value had remained below one million euros, no inheritance tax would have been due.
There is also another aspect that is often overlooked by those focusing only on the main tax. Where real estate is involved, mortgage registration tax and cadastral tax are also payable in relation to the properties included in the succession. Knowing in advance that the total amount is not limited to inheritance tax helps the heir avoid underestimating the overall financial commitment and prepare properly for the filing of the declaration.
Taxation of inherited assets situated in Italy
At this point, the question becomes more specific: what exactly is considered an asset situated in Italy? This is a decisive issue because, where the deceased was not resident in Italy, taxation of the inheritance is limited to assets that the law regards as being located within Italian territory. Defining the scope incorrectly means declaring either too much or too little.
The law provides a relatively precise list. Assets considered to be located in Italy include, among others, real estate and related property rights, shares and interests in companies or entities with their registered office, administrative headquarters or principal business activity in Italy, bonds and other securities issued by the State or by persons resident in Italy, receivables where the debtor is resident in Italy, and movable property physically located within the country. Ships and aircraft registered in national registers are also included, together with certain categories of goods and receivables connected with assets located in Italy.
For an heir living abroad, this framework is particularly useful. The taxable value is determined by reference only to the Italian assets, each of which is valued according to the relevant statutory criteria. Real estate is generally valued on the basis of the revalued cadastral value, bank accounts according to the balance at the date of death and company interests by reference to the net asset value.
This process of identification and valuation requires a methodical approach because each type of asset follows its own rule. Accurately determining which assets are taxable in Italy and their value is what allows the correct amount to be paid, without paying more than necessary and without exposing the heir to future disputes.
The risk of double taxation between two countries
We now come to the concern shared by almost every international heir: paying tax twice on the same estate, once in Italy and once in another country. The risk exists, but there are remedies, and understanding how they work helps prevent unnecessary anxiety.
The first remedy is provided by Italian law. Where the deceased was resident in Italy and Italian inheritance tax also applies to assets located abroad, the tax paid in Italy may be reduced by the inheritance tax paid to a foreign country on the same succession and in relation to the assets situated in that country. The credit is available up to the amount of Italian tax proportionate to the value of those foreign assets. In this way, the same asset is not fully taxed twice.
A more delicate issue concerns assets situated in Italy. Italy taxes these assets, but the country where the heir lives may also impose tax on the inheritance received. In this situation, the solution does not come from Italian law alone, but from the rules of the other country and from international conventions against double taxation, where they exist. These instruments determine which country has the right to tax and how any duplication should be neutralised.
The practical point is that the risk can be managed, but only by examining both legal systems together rather than separately. Verifying in advance how the Italian tax system interacts with that of the country where the heir lives turns a general concern into a precise calculation and often results in a tangible saving.
The most common mistakes made by heirs living abroad
Many mistakes recur regularly in this area, and almost all arise from missing information rather than genuine complexity. The most dangerous is assuming that, because the heir lives abroad, Italy has no tax claim. As explained, tax is still due on assets situated in Italy, and failing to recognise this exposes the heir to assessments and penalties.
The next most common mistake is delay. The succession declaration must be filed within twelve months from the opening of the succession, and those living abroad often postpone the process, underestimating how long it takes to obtain certificates, land registry searches and valuations across two countries. Another recurring error is confusing the heir’s residence with that of the deceased and calculating the tax on the wrong basis, either declaring assets that should not have been included or omitting relevant assets.
Some heirs consider only inheritance tax and forget mortgage registration tax and cadastral tax on real estate, resulting in a higher total amount than expected. Others, by contrast, pay more than necessary because they fail to claim a credit for tax already paid abroad where the requirements are satisfied. The valuation of assets is another area where mistakes are common. Assigning an approximate value to properties or company interests may result in adjustments many years later.
In our experience, the common factor behind these mistakes is improvisation, made worse by distance. Handling the matter according to a clear method, with someone able to coordinate the rules of both countries, is what prevents a small misunderstanding from becoming a significant cost.
When tax and legal advice is needed
Not every succession requires the same level of assistance, and it is reasonable to assess this before taking action. Where there is only one asset of modest value in Italy and the family relationship is straightforward, the heir may in many cases manage through ordinary formalities. The position changes when an international element is involved, because each step must be coordinated across two legal systems.
Advice is needed where the estate includes real estate, company interests or bank accounts that must be valued according to precise criteria, where it is necessary to establish whether the deceased was genuinely resident in Italy or abroad and determine the resulting taxable base, where a credit must be claimed for taxes paid outside Italy, or where the heir’s country of residence also seeks to tax the inheritance, raising the issue of double taxation. In all these situations, an error in the initial approach does not merely result in additional expense. It may lead to disputes arising years later.
This is where the assistance of the Law Firm provides real value. We combine the tax and legal analysis of the succession and rely on trusted professionals in the principal foreign jurisdictions to coordinate the Italian requirements with those of the country where the heir lives, from the valuation of assets to dealings with the tax authorities of both countries. If you have inherited assets in Italy while living abroad, the Family Law Boschetti team assists you in calculating exactly what is due, obtaining every legitimate tax saving and completing the process without leaving unresolved issues.
