Italy non-resident heir inheritance tax: the planning gap to manage

The Italian inheritance tax regime for non-resident heirs is not a single rate but a cascade of thresholds, relationship tiers, and asset-location rules that can produce radically different liabilities depending on the decedent’s residence, the heir’s domicile, and the asset’s situs. Most commentary focuses on the headline 4% rate for direct descendants, yet the planning gap that catches advisors off-guard is the interaction between Italy’s *imposta sulle successioni* and the heir’s home-jurisdiction tax code, particularly when the deceased was an Italian tax resident but the heir is not. A 2026-specific event sharpens the question: Italy’s *Legge di Bilancio 2025* (Law 207/2024, published 30 December 2024) introduced a 0.75% *imposta di bollo* on foreign financial assets held by Italian residents, and while the provision targets living owners, its logic may influence how the *Agenzia delle Entrate* assesses situs for inheritance purposes in audits. For a non-resident heir inheriting from an Italian-resident parent, the effective tax rate can range from 0% (if the heir is a spouse or direct descendant and the estate is below EUR 1 million per beneficiary) to 8% on the excess over EUR 1 million for siblings, and 8% on the entire estate for more distant relatives or unrelated parties, with a EUR 6,000 exemption per beneficiary for the latter category. The real complexity, however, lies in the application of the *imposta ipotecaria* (2%) and *imposta catastale* (1%) on Italian real property, which are due regardless of the heir’s residence, and in the treatment of foreign-situs assets owned by the Italian decedent. This article examines the statutory framework, identifies the gap between Italian domestic law and the heir’s reporting obligations in their home jurisdiction, and provides a structured planning checklist for the 2025-2026 window. ## The statutory framework of *imposta sulle successioni* Italy’s inheritance tax is governed by *Decreto Legislativo 31 ottobre 1990, n. 346* (the “Testo Unico delle Successioni”), as amended most recently by *Legge 27 dicembre 2013, n. 147*. The regime applies to the worldwide estate of any person who was a resident of Italy for tax purposes at the time of death, and to Italian-situs assets only for non-resident decedents. The distinction between resident and non-resident decedent is therefore the first determinant of the tax base. ### Relationship-based rates and exemptions The tax is levied on the net value of each heir’s share, after deducting any debts and charges attributable to that share. The rates are progressive only in the sense that the exemption amount changes by relationship category; above the exemption, the rate is flat within each category. - **Spouse and direct descendants (including adopted children):** 4% on the value exceeding EUR 1,000,000 per beneficiary. The first EUR 1 million per heir is exempt. This is the most favourable category. - **Siblings:** 6% on the value exceeding EUR 100,000 per beneficiary. The first EUR 100,000 per sibling is exempt. - **Other relatives up to the fourth degree, relatives by affinity up to the third degree, and related parties (e.g., in-laws):** 6% on the entire value, with no exemption. - **All other persons (unrelated heirs):** 8% on the entire value, with a flat EUR 6,000 exemption per beneficiary. These rates apply to both movable and immovable property, but the calculation of net value for real estate includes a crucial adjustment: the cadastral value (*valore catastale*) is used for Italian property, not the market value. The cadastral value is typically 50-70% of market value, which can produce a significantly lower tax base than the heir might expect. ### The situs rule for non-resident decedents If the deceased was not an Italian tax resident, only assets located in Italy are subject to Italian inheritance tax. The *Testo Unico* defines situs for different asset classes: real property by physical location, registered movable property (vehicles, boats, aircraft) by the Italian registry, and shares in Italian companies by the company’s registered office. Bank accounts held with Italian banks are Italian-situs regardless of the currency or the depositor’s residence. This rule creates a planning opportunity: a non-resident decedent with a EUR 5 million portfolio in a Swiss bank account and a EUR 500,000 apartment in Rome will owe Italian inheritance tax only on the apartment, not on the portfolio. ## The non-resident heir’s exposure: two distinct tax events The gap that advisors must manage arises because the non-resident heir faces two separate tax events: the Italian inheritance tax on the Italian-situs assets (if the decedent was Italian-resident) or on the worldwide estate (if the decedent was Italian-resident), and the inheritance or estate tax in the heir’s home jurisdiction. The two systems do not coordinate automatically, and double taxation can result unless the heir’s home jurisdiction offers a foreign tax credit or an exemption for foreign-situs inheritances. ### The Italian tax event for the non-resident heir A non-resident heir inheriting from an Italian-resident decedent must file the Italian inheritance tax return (*dichiarazione di successione*) within 12 months of death. The return is filed with the *Agenzia delle Entrate* in the province where the decedent had their last residence. The tax is due at the time of filing, though payment can be deferred in instalments for estates that include illiquid assets. The key point for the non-resident heir is that the Italian tax liability is calculated on their share of the worldwide estate, not just the Italian-situs assets. If the decedent held a EUR 3 million portfolio in a US brokerage account and a EUR 2 million villa in Tuscany, and the sole heir is a non-resident child, the Italian tax base is EUR 5 million, the exemption is EUR 1 million, and the tax at 4% is EUR 160,000. The heir must pay this to the Italian tax authority, regardless of where the assets are located. ### The home-jurisdiction tax event The same heir will typically owe inheritance or estate tax in their country of residence. In the United States, for example, the federal estate tax applies to the worldwide estate of a US resident, with a lifetime exemption of USD 13.61 million per individual in 2024 (indexed for inflation; the 2025 figure is estimated at USD 13.99 million under current law). If the heir is a US resident, the Italian inheritance tax paid on the same assets may be creditable against the US estate tax under the US-Italy estate tax treaty (Convention for the Avoidance of Double Taxation with Respect to Taxes on Estates and Inheritances, signed 26 March 1984). The treaty provides a foreign tax credit for Italian inheritance tax paid on Italian-situs assets, but the credit is limited to the US tax attributable to those assets. The gap appears when the Italian tax is paid on non-Italian-situs assets (e.g., the US brokerage account). Under the treaty, the US may not allow a credit for Italian tax on assets that the US considers to be US-situs. The result is double taxation on the portfolio: Italy taxes it because the decedent was Italian-resident, and the US taxes it because the assets are located in the US and the heir is US-resident. ## Worked example: the EUR 5 million estate with a US-resident heir Consider a composite case: the decedent, an Italian citizen who lived in Milan and was a tax resident of Italy, dies in 2025. The estate consists of a EUR 2 million apartment in Rome, a EUR 2.5 million portfolio of US-listed equities held in a US brokerage account, and EUR 500,000 in a Swiss bank account. The sole heir is the decedent’s child, a US resident who has lived in New York for 15 years and holds US citizenship. ### Italian inheritance tax calculation The heir’s share of the worldwide estate is EUR 5 million. The exemption for a direct descendant is EUR 1 million, leaving a taxable base of EUR 4 million. At 4%, the Italian inheritance tax is EUR 160,000. The Italian tax on the real estate component is computed using the cadastral value of the apartment, which is assumed at EUR 1.2 million (60% of market value). The *imposta ipotecaria* (2%) and *imposta catastale* (1%) on the real estate transfer add EUR 36,000 (3% of EUR 1.2 million). Total Italian tax due: EUR 196,000. ### US estate tax calculation The US estate tax applies to the worldwide estate of the decedent if the decedent was a US resident, but in this case the decedent was an Italian resident. The US estate tax therefore applies only to US-situs assets owned by a non-resident decedent. The US-situs assets are the US brokerage account (EUR 2.5 million) and, under US situs rules, the Swiss bank account is not US-situs. The US estate tax base is EUR 2.5 million, or approximately USD 2.7 million at an assumed exchange rate of 1.08. The US estate tax exemption for a non-resident decedent is USD 60,000 (Section 2102 of the Internal Revenue Code), so the taxable estate is USD 2.64 million. The US estate tax rate for non-resident decedents is 6-18% on the first USD 1 million of taxable value and 30% on the excess (Section 2101(d)). The tax on USD 2.64 million is approximately USD 660,000 (18% on the first USD 1 million and 30% on the remaining USD 1.64 million). The US-Italy estate tax treaty allows a credit for Italian inheritance tax paid on Italian-situs assets, but the US portfolio is not Italian-situs under the treaty. The credit is therefore limited to the Italian tax attributable to the apartment and the Swiss account, which is a fraction of the EUR 160,000. The heir faces an effective double-tax burden of approximately EUR 196,000 (Italy) plus USD 660,000 (US), with a treaty credit of perhaps EUR 30,000-40,000. ### The planning gap The gap is that the Italian tax on the US portfolio is not creditable against the US estate tax, because the US considers the portfolio to be US-situs and Italy considers it to be part of the worldwide estate. The heir could have avoided this by ensuring that the decedent transferred the US portfolio to a non-US structure, such as a Luxembourg variable capital company (SICAV) or a Swiss trust, before death, but this requires advance planning and careful attention to Italian controlled foreign corporation rules. ## The 2025-2026 legislative context Two recent legislative developments affect the planning landscape for non-resident heirs. First, the *Legge di Bilancio 2025* introduced a 0.75% annual *imposta di bollo* on foreign financial assets held by Italian residents, effective from 1 January 2025. While this tax applies to the living owner, it signals that the *Agenzia delle Entrate* is increasing its focus on foreign assets. For inheritance planning, the *imposta di bollo* creates a compliance burden for the estate administrator, who must report and pay the tax for the period between the date of death and the transfer of the assets to the heir. Second, the *Decreto Fiscale 2024* (Legislative Decree 216/2023, converted into Law 6/2024) introduced new reporting obligations for foreign trusts and similar structures, which may affect the use of trusts as inheritance planning vehicles for Italian-resident decedents with non-resident heirs. ### The trust solution and its limitations A trust established by the Italian-resident decedent during their lifetime can remove assets from the Italian inheritance tax base, provided the trust is irrevocable and the decedent retains no beneficial interest. The *Testo Unico delle Successioni* taxes only assets that form part of the decedent’s estate at death; assets held in a properly structured trust are not part of the estate. However, Italy’s *imposta sulle successioni* applies to the transfer of assets to a trust at the time of settlement if the settlor is Italian-resident and the trust is considered opaque (i.e., the beneficiaries are not identified at the time of settlement). The rate is 8% on the entire value, with no exemption. If the trust is transparent and the beneficiaries are identified, the transfer is treated as a direct gift to the beneficiaries and taxed at the relationship-based rates. The planning challenge is that the Italian tax authority may recharacterise the trust as a sham if the settlor retains control, and the *Decreto Fiscale 2024* requires disclosure of all foreign trusts with Italian-resident settlors or beneficiaries. ## The five-point planning checklist for 2025-2026 Advisors managing cross-jurisdictional inheritance planning for Italian-resident clients with non-resident heirs should address the following points before the next *dichiarazione di successione* deadline. 1. Determine the decedent’s tax residence status at death under both Italian domestic law and the applicable double-taxation treaty, because a finding of non-residence eliminates the worldwide estate tax base and limits Italian tax to Italian-situs assets only. 2. Quantify the situs of each material asset class under Italian law and the heir’s home-jurisdiction law, and identify any asset that will be taxed by both jurisdictions without a creditable foreign tax credit. 3. Evaluate whether a lifetime transfer of foreign-situs assets to a non-Italian structure (such as a Luxembourg SICAV, a Swiss trust, or a Liechtenstein foundation) is feasible and compliant with Italian controlled foreign corporation rules and the *Decreto Fiscale 2024* reporting obligations. 4. Confirm the cadastral value of any Italian real property and compare it to the market value, because the tax base for Italian inheritance tax on real estate is the cadastral value, not the market value, and the difference can be substantial. 5. File the *dichiarazione di successione* within 12 months of death and pay the tax in a single instalment or in up to eight quarterly instalments if the estate includes illiquid assets, and retain evidence of payment for the foreign tax credit claim in the heir’s home jurisdiction. ## Sources - Decreto Legislativo 31 ottobre 1990, n. 346 (Testo Unico delle Successioni). Available at: https://www.normattiva.it/uri-res/N2Ls?urn:nir:stato:decreto.legislativo:1990-10-31;346 - Legge 27 dicembre 2013, n. 147 (Legge di Stabilità 2014). Available at: https://www.gazzettaufficiale.it/eli/id/2013/12/27/13G00191/sg - Legge 30 dicembre 2024, n. 207 (Legge di Bilancio 2025). Available at: https://www.gazzettaufficiale.it/eli/id/2024/12/31/24G00255/sg - Convention between the United States of America and the Italian Republic for the Avoidance of Double Taxation with Respect to Taxes on Estates and Inheritances, signed 26 March 1984. Available at: https://www.irs.gov/pub/irs-trty/italyest.pdf - Internal Revenue Code, Sections 2101-2108 (Estate Tax on Nonresidents Not Citizens). Available at: https://www.law.cornell.edu/uscode/text/26/2101 - Decreto Legislativo 27 dicembre 2023, n. 216 (Decreto Fiscale 2024), converted into Legge 6 febbraio 2024, n. 6. Available at: https://www.gazzettaufficiale.it/eli/id/2024/02/06/24G00015/sg