Clients bracing for an Italian tax bill are usually bracing for the wrong number. Italian inheritance tax (imposta di successione) is not calculated the way US estate tax, UK inheritance tax or the death taxes of most other countries are, and for a spouse or child it is often close to nothing. The rate depends on how closely you were related to the person who died, and most heirs never see a bill at all because of a tax-free threshold that applies before any rate is charged.
The rate depends on the relationship, not the estate
Italy taxes each heir separately, on what that heir receives, not on the estate as a whole. There are four bands:
- Spouse and children (and other direct-line relatives, such as parents or grandchildren): 4%, but only on the value each heir receives above €1,000,000. Below that threshold, nothing is owed.
- Siblings: 6%, on the value above €100,000 per sibling.
- Other relatives up to the fourth degree, and in-laws up to the third degree: 6%, with no tax-free threshold — the rate applies from the first euro.
- Everyone else, including an unmarried partner or a friend named in a will: 8%, again with no threshold.
A heir who is severely disabled, within the meaning Italian law gives that term, gets a threshold of €1,500,000 regardless of which of the above categories they fall into. That is worth flagging early if it applies, because it is easy to miss from abroad.
Each threshold is personal to the heir, not shared. Two children inheriting a €2,400,000 estate equally do not divide one €1,000,000 exemption between them — each has a €1,000,000 exemption against their own €1,200,000 share, so each pays 4% on €200,000.
What gets valued, and why that matters more than the rate
The tax is charged on the value declared in the succession filing, and for real estate that value is not the market price. Residential property is normally valued using the cadastral value — a figure derived from the property's official land-registry classification and a fixed multiplier, almost always well below what the property would sell for. This is the detail that most surprises common-law clients: a flat in Rome worth €900,000 on the market can carry a cadastral value closer to a third of that, and it is the lower figure the 4% or 6% rate applies to.
Bank accounts, investments and other movable assets are valued at their balance on the date of death, without the same cadastral discount. So an estate weighted toward Italian real estate is usually taxed more gently than the same value held in cash.
The other two taxes, and the one that can be waived
Real estate carries two further charges alongside the inheritance tax itself: a mortgage tax (imposta ipotecaria), generally 2% of the cadastral value, and a cadastral tax (imposta catastale), generally 1%. Both are reduced to a flat €200 each if at least one heir qualifies for Italy's first-home benefits on that property and elects for them — broadly, the heir does not already own another home benefiting from the same relief in the same municipality, and takes on the conditions that go with it. Whether it is worth electing is a case-by-case question, because the benefit carries its own conditions on later use and sale of the property.
Why this differs from what you are expecting
For a US reader, the mental model is usually the federal estate tax, levied on the estate before distribution, with an exemption in the tens of millions and a top rate near 40%. Italy taxes the other way round — the heir, not the estate — at rates that top out at 8%, though of course the US and Italian rules are entirely separate and a large enough estate can still owe US estate tax on top, so it is treated separately, not netted off.
For a UK reader, the closer comparison is UK Inheritance Tax: a 40% charge on the estate above the nil-rate band, again levied before distribution. Italy's spouse-and-children rate of 4% on amounts over €1,000,000, per heir, is a genuinely different order of magnitude, and it is worth putting the two side by side rather than assuming the UK experience carries over.
For Canadian and Australian readers there may be no direct comparison at all, since neither country has an inheritance tax: what those systems tax instead is a deemed disposition, or a later capital gain, at the point the heir eventually sells. Italy's inheritance tax is charged once, at death, separately from any Italian capital gains question that arises later if the property is sold — a topic on its own, since the rules there turn on how long the property is held after inheriting.
How and when it is paid
The inheritance tax is calculated and settled through the declaration of succession (dichiarazione di successione), the same filing that must be made within twelve months of death — covered in full in our note on the succession declaration. Recent changes moved the calculation onto a self-assessment basis rather than waiting for the tax office to issue its own figure, which shortens the process for straightforward estates but places more weight on getting the valuation right the first time; the current mechanics should be confirmed against the filing in front of you rather than assumed.
Working through a real example
Take a straightforward case: a parent living in Italy dies leaving a flat with a cadastral value of €300,000 and a bank account with €150,000, split equally between two children. Each child's share is €225,000 — comfortably under the €1,000,000 personal threshold, so neither owes any inheritance tax at all. What each does owe is the mortgage and cadastral tax on their half of the property: 2% and 1% of their share of the cadastral value, so roughly €4,500 combined per child, or a flat €400 each if one of them elects for the first-home benefit on the flat. That is the whole bill. For most spouses and children inheriting ordinary family assets, this is the realistic outcome — not the six-figure number a US or UK estate tax calculation would suggest.
Change one fact and the answer changes with it: if the same flat instead passed to a nephew rather than a child, the 6% no-threshold rate would apply to the entire €150,000 share from the first euro, because a nephew falls outside the direct line and outside the sibling band. Who exactly inherits is therefore not a detail — it decides which of the four bands the calculation starts from.
Where heirs get the number wrong
The two recurring mistakes are undervaluing property to reduce the bill, and forgetting that the €1,000,000 (or €100,000) threshold is checked against the cumulative value a given heir has received from the same person, including gifts made while they were alive within the period the law looks back at. Both create problems later — an undervaluation raises questions when the property is eventually sold, and an overlooked lifetime gift can turn what looked like a tax-free inheritance into a partial bill discovered after the filing is already in.
None of this replaces advice from your own accountant on what Italy's tax means for your position at home. Every estate carries its own mix of relationships, assets and prior gifts, and the number only becomes real once those are on the table: the first consultation is free and it is with a lawyer.