Italy Inheritance Tax: One of Europe’s Most Favorable Regimes

Recent reforms for 2025 and 2026

Italian Legislative Decree No. 139 of 2024 introduced significant changes to the inheritance and gift tax system, which became effective for successions opened on or after January 1, 2025. The reforms continue with additional updates taking effect on January 1, 2026.

The most important change is that from January 1, 2026, gifts and inheritances have completely separate exemption thresholds. Previously, lifetime gifts would reduce the allowance available for inheritances received from the same person.

Under the new system, each spouse or child can receive up to EUR 1.0M tax-free in gifts during the parent's lifetime, plus a separate EUR 1.0M tax-free allowance when they inherit from that parent. This effectively doubles the tax-free amount to EUR 2.0M per child.

The decree also updated succession law more broadly, aiming to align it with the current regulatory and economic framework. These changes make Italy's already favorable inheritance tax system even more attractive for families planning wealth transfer.

Trusts and succession planning

Trusts have become an increasingly popular tool for estate planning in Italy, though recent reforms have clarified how they are taxed. Transfers to trusts or distributions from trusts to beneficiaries are now expressly subject to inheritance and gift tax if they result in a gratuitous enrichment of beneficiaries.

For trusts where the settlor is an Italian resident at the time of asset separation, tax is due on all assets and rights transferred to the beneficiaries. For non-resident settlors, tax applies only to assets existing in Italian territory.

The relationship-based tax rates and allowances described earlier apply to trust distributions in the same way they would to direct inheritances. This means a child receiving EUR 1.0M from a family trust would still benefit from the full tax-free allowance.

Business succession planning offers special opportunities. If business owners transfer company shares to their children, the inheritance can be fully exempt from Italian inheritance tax, provided the heirs continue running the business for at least five years.

This exemption is designed to protect family businesses and prevent forced sales to pay tax bills. It applies to both sole proprietorships and corporate shares, making it a powerful tool for multi-generational business planning.

Life insurance and tax-exempt assets

Life insurance policies with direct beneficiaries are generally exempt from Italian inheritance tax. This makes them a highly effective tool for passing wealth to heirs tax-efficiently.

When you designate a beneficiary on a life insurance policy, the proceeds typically pass directly to that person without going through probate or being subject to inheritance tax. This exemption applies regardless of the beneficiary's relationship to you or the amount of the policy.

Italian Treasury bonds are also exempt from inheritance tax. If your estate includes government bonds, your heirs will receive them without any tax liability related to those specific assets.

These exemptions create opportunities for strategic estate planning. By structuring a portion of your wealth in life insurance or Italian government bonds, you can effectively reduce the taxable portion of your estate.

Filing requirements and deadlines

Italian law requires beneficiaries to file an inheritance tax return within one year of the death. Missing this deadline can result in penalties and interest charges.

The declaration must include a complete inventory of the deceased's assets, their values, and details of all beneficiaries. For real estate, the cadastral values must be calculated according to the official formulas based on the property's cadastral income and category.

Even if no tax is due because the inheritance falls below the applicable allowances, a declaration must still be filed. The one-year deadline applies regardless of whether tax is owed.

Comparing Italy to other European countries

Italy's inheritance tax system is one of the most favorable in Europe when you examine both rates and allowances. This becomes clear when comparing it to other major European economies.

In France, inheritance tax rates range from 5% to 45% for most transfers, but can climb as high as 60% for distant relatives. Even direct descendants face significantly higher rates than in Italy once they exceed the allowances.

Germany applies rates from 7% to 50% depending on the amount and relationship. While close family members receive substantial allowances, the top marginal rates are far higher than Italy's maximum 4% for spouses and children.

Spain has perhaps the most punitive system, with rates ranging from 7.7% to an extraordinary 87.6%. Regional variations add complexity, but the overall burden can be substantially higher than in Italy.

Italy's maximum rates of 4% to 8% make it objectively one of the lowest-tax jurisdictions in Europe for inheritance. Combined with the generous EUR 1.0M allowance for spouses and children, most middle-class and even affluent families pay little to no inheritance tax.

Revenue statistics confirm this. Inheritance taxes generated only 0.1% of total tax revenue in Italy, compared to 0.52% in Germany, 0.58% in Spain, and 1.36% in France.

Practical steps for estate planning in Italy

Whether you are an Italian resident or a foreign national with Italian assets, several practical steps can help optimize your estate plan under the Italian tax system.

First, take advantage of the separate gift and inheritance allowances introduced in 2025. Consider making lifetime gifts of up to EUR 1.0M to each child, knowing they will still receive the full EUR 1.0M allowance when you pass away.

If you own Italian real estate, designate which property should be treated as a primary residence by your heirs. The fixed EUR 0K rates for mortgage and cadastral taxes on primary residences can save thousands of euros.

Consider life insurance as a tax-efficient way to leave additional wealth to beneficiaries. Because life insurance proceeds are exempt from inheritance tax, they can supplement what you leave through your estate without increasing the tax burden.

If you own a business, plan for succession early to take advantage of the business exemption. Ensure your heirs are prepared to continue operating the business for the required five-year period to qualify for tax-free treatment.

Maintain detailed records of all assets, especially foreign assets if you are an Italian resident. The worldwide scope of Italian inheritance tax for residents means you need comprehensive documentation to support your eventual inheritance tax return.

Consult with legal and tax professionals who specialize in Italian succession law. The interaction between Italian domestic law, international tax treaties, and the succession laws of other countries where you may have assets requires expert guidance.

The bottom line

Italy offers one of Europe's most taxpayer-friendly inheritance tax regimes. With rates of just 4% to 8%, generous allowances reaching EUR 1.0M for close family members, and special exemptions for life insurance and business succession, the system is designed to facilitate intergenerational wealth transfer.

Recent reforms have made the regime even more attractive by separating gift and inheritance allowances. This effectively doubles the tax-free amounts available to children and spouses.

Combined with the low cadastral values used for property taxation and the primary residence exemption, most families face minimal tax on inherited wealth.

For high-net-worth individuals and families, Italy's combination of favorable tax treatment, sophisticated planning opportunities through trusts and life insurance, and access to one of Europe's most dynamic economies makes it an increasingly attractive jurisdiction for residence and wealth management.

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