Source: https://content.step.org/jr-italy
Timestamp: 2020-08-06 22:30:51
Document Index: 544710463

Matched Legal Cases: ['art.456', 'art. 591', 'art.2645', 'art.2645', 'art.2645', 'art.11', 'art.44', 'art.26', 'art.89', 'art.86', 'art.3', 'art.27', 'art.2', 'art.47', 'art.2', 'art.2740', 'art.2901']

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Jurisdiction report
*Updated July 2020*
Diana Palomba TEP, Ingad Trust SRL, Milan
Civil Law.
Refer to the second book of the Italian Civil Code (the Code), art.456ss (forced heirship regime). If the value of the estate due is less than EUR 75,000, no declaration of succession is required (Legislative Decree 20/6/2013).
Intestate succession: the estate is devolved to the spouse or to the surviving partner of civil union, descendants, adopted children, ascendants, siblings, collaterals, any relation within the sixth degree in quotas varying according to the degree of relationship and the number of heirs called to the succession. Where none of the preceding are identified, the estate devolves to the state.
Testamentary succession: the estate is devolved following the provisions of the will with the possibility by the heirs to challenge the will for breach of heirship rights or nullity.
Family law and defined inheritance rules
There are forced heirship rules governing testamentary succession. See table below:
Testamentary succession: reserved quotas
Reserved quotas
One child, no spouse
Two or more children, no spouse
Ascendants (no spouse, no children)
Spouse and
(no children)
Separated spouse without fault (no children or ascendants)
with fault with maintenance
The succession opens at the death of the deceased in the place of the deceased’s last domicile. Under Italian private international law, the law governing succession is that of citizenship of the deceased or, by election in the will, that of residence of the deceased. Under EU Succession Regulation (EU 650/2012), the law governing succession is that of habitual residence of the deceased at the moment of death; however, it is possible to apply by election the law of the home country of the deceased.
The Italian system does not provide for specific proceedings to govern succession; however, to be able to acquire possession of the assets fallen in succession for intestate succession a declaration has to be made by at least by one of the heirs stating who the rightful known heirs of the deceased are. For testamentary succession, the will has to be published by a notary public who informs the heirs and legates. The heirs have to accept inheritance, directly or indirectly within ten years from the date of death of the deceased.
Testamentary capacity (art. 591 of the Code): anybody who is not considered by law to lack capacity has the capacity to dispose by will. The following under the law lack capacity to dispose by will: minors; those declared mentally disabled; anybody who at the moment of drafting the will did not, even only temporarily, have the capacity to perceive and take a decision.
Capacity to receive: anybody lacking capacity can only receive through their guardian and with the authorisation of the court. The following cannot receive by will: the guardian cannot receive from the ward; the notary, witnesses and interpreters that take part in drafting the will; any institution not recognised at law that does not receive recognition within a year from the date of opening of the succession.
Use of trusts in estate planning
Trusts are recognised by Italian law under the Hague's Convention of 1 July 1985 on the Law Applicable to Trusts and on their Recognition (the Convention), ratified by Italy on 16 October 1989. Trusts can therefore be used for estate-planning purposes and will be recognised in Italy if they satisfy the requirements of the Convention; the foreign law that governs the trust is compatible with Italian public policy and Italian mandatory rules of law; and the purpose of the trust is not to protect the settlor’s assets from creditors’ rights and its worthy of protection. Italy does not have a law on trusts, therefore the testator can choose the law governing the trust. Where the disposition in trust breaches heirship rights the heir has a right of action for reduction of the assets placed in trust.
Use of foundations in estate planning
Foundations in Italy are governed by arts.12 and 14 to 35 of the Code. They can be set up by will, but acquire legal status only by recognition granted by national or regional public authority. Because of the very strict controls on their administration and the limitation of their operation and object, they are not often used for estate planning.
Types of entities
Use of Designated Assets: Article 2645-ter of the Code provides for a structure very similar to the traditional common-law trust structure. A grantor can dispose of assets, binding them for a certain period of time for the accomplishment of certain interests related to certain subjects. The designation clearly separates the designated assets from the other assets of the grantor, and, giving right of action to the grantor or any other interested party, creates an obligation to act according to the grantor’s will on the subject receiving the designated assets. The structure envisaged by art.2645-ter differs from the traditional structure of a trust. Article 2645-ter does not refer to a transfer of assets and therefore ‘the designation’ need not necessarily to involve the transfer of property rights. Upon the grantor’s death, the heirs will receive these assets subject to the designation for its duration. Also, whereas art.2645-ter provides for a right of action of the grantor within a trust structure, the beneficiaries of a trust would have right of action. Finally, art.2645-ter only applies to the designation of certain assets and provides that designation must be by public deed.
Income tax system
Subject to treaties addressing double taxation, liability for taxation in Italy is determined by tax residence and source of income. An individual, whether Italian or of foreign nationality, who is deemed to have tax residence in Italy, is subject to Italian taxation on worldwide income and tax on real estate owned worldwide (there is no wealth tax in Italy).
Personal income is taxed with IRPEF (Imposta Redditi Persone Fisiche) at the following rates (according to art.11 of Presidential Decree (DPR) 917/86
Income (EUR)
Tax (EUR)
0 to 15,000
15,001 to 28,000:
3,450 +27% on the amount exceeding 15,000
28,001 to 55,000:
6,960 +38% on the amount exceeding 28,000
55,001 to 75,000:
17,220 +41% on the amount exceeding 55,000
75,001 and over:
25,420 +43% on the amount exceeding 75,000
Professionals operating with a working structure are also subject to IRAP (Imposta Regionale Attività Produttive, DPR 446/97) calculated on the balance between proceeds and costs applying specific criteria. The rate can vary from 3.9 per cent to 4.82 per cent depending on the region. This tax is partially deductible from IRPEF.
Income from capital investments has specific taxation criteria that vary according to the nature of the investment (art.44 and subs of the DPR 917/86, art.26 and subs of the DPR 600/73).
Dividends formed and distributed starting from the 1 January 2018 to individual shareholders are subject to final withholding tax levied at 26 per cent.
Companies are taxed with:
IRES (Imposta Redditi Societari, DPR 917/1986) on profits at 24 per cent.
IRAP (Imposta Regionale Attività Produttiva, DPR 446/97) on a taxable amount calculated taking into account the value of production and costs according to criteria that vary from subject to subject (the ordinary rate can vary from 3.9 per cent to 4.82 per cent depending on the region). This tax is partially deductible from IRES.
Dividends distributed to resident companies are taxed on 5 per cent of the amount distributed (a 95 per cent exemption applies) (art.89 of the DPR 917/86).
Capital gains of a company (art.86 of the DPR 917/86) are considered as income and therefore are subject to IRES, capital losses are deductible from income. With reference to assets owned for more than three years, gains can be spread over four years.
Capital gains realised upon transfer of participations by resident companies are 95 per cent income tax exempt under the following conditions:
uninterrupted possession from the first day of the twelfth month preceding the month of the sale, the shares or quotas most recently acquired being considered the first sold;
classification as noncurrent financial assets in the first financial statement of the possession period;
tax residence of the participated company in a state or territory which is not a tax haven or positive controlled foreign company ruling;
the participated company held operates a commercial enterprise.
In case of qualifying participation (5 per cent of quoted companies and 25 per cent of unquoted companies or 2 per cent voting rights for quoted companies and 20 per cent voting rights for unquoted companies), capital gain from financial transactions of individuals (arts.67 and 68 of the DPR 917/86) is taxed as a general rule as part of income taking into account:
for capital gain realised by 31 December 2017, 49.72 per cent of the gain;
for capital gain realised from 1 January 2018, 58.14 per cent of the gain.
If the capital gains source is a tax-friendly country the capital gain is fully taxed as part of income.
In case of unqualified participation, capital gain is taxed with a tax in lieu of 26 per cent unless the source is a tax-friendly country, in which case the capital gain is taxed as part of income.
Capital gains realised from 1 January 2019 are taxed with a tax in lieu of 26 per cent, regardless of the nature of qualifying or non-qualifying participations from which the gain arises.
Non-residents taxation
An individual, whether Italian or of foreign nationality, who is not deemed to have tax residence in Italy is subject to Italian taxation on Italian-source income (art.3 of the DPR 917/1986).
Withholding tax rate (non-treaty)
As a general rule and considering only the main items of taxation:
Income paid by Italian tax residents to non-residents that do not have a permanent establishment in Italy is subject to withholding tax at the rate of 30 per cent.
Dividends paid by an Italian tax resident to a non-resident individual is subject to final withholding tax at the rate of 26 per cent with the refund of 11 per cent of the tax paid abroad on the same income if appropriate documentation is submitted.
Dividends paid to companies resident in the EU and EEA is subject to withholding tax at the rate of 1.2 per cent (art.27 co. 3-ter of the DPR 600/73).
Dividend falling within the scope of application of the EU's Parent Subsidiary Directive is not subject to Italian withholding tax.
Withholding tax rate (treaty)
Dividends are subject to withholding tax varying from 5 per cent to 40 per cent varying from country to country.
Interest is subject to withholding tax varying from 0 to 30 per cent varying from country to country.
Royalties are subject to withholding tax varying from 0 to 30 per cent varying from country to country./li>
Taxation at death
Succession tax (art.2 of the Code, art.47 set seq. of 262/2006, 286/2006)
Inheritance tax is due from heirs and legatees with the exception of the state; political parties; non-profit entities (ONLUS); foundations and associations that are recognised and have as their purpose an activity listed as being for the public benefit; participation in the family business transferred with a family agreement; and property that was held in usufruct by the deceased and is joined with the bare property.
A declaration of succession has to be submitted within 12 months from the date of death by one of the heirs, legates or executor for successions opened in Italy or for successions opened abroad with reference to estate in Italy, unless the value of the estate subject to declaration falls under EUR75,000 (20/06/2013), no real estate has fallen in succession and the estate devolves to spouse or issue.
Italy has signed a convention against double taxation relating to succession with the following countries: Denmark, France, Greece, Israel, Sweden, the UK and the US.
Gift tax (arts.55-60 of Legislative Decrees 346/90. 346/90, Circ. AE 22.01.2008 n.3/E, Circ.AE 27.03.2008 n.28/E) is due on registration of the deed of gift from the donee tax resident in Italy or by a non-resident if the deed is executed in Italy.
The following table shows how gifts and succession are taxed. Taxation of assets: Italy has no wealth tax but the IMU (Imposta Municipale Unica) taxes real estate owned worldwide by tax residents (Legislative Decree 6/12/2011).
GIFT AND SUCCESSION TAX RATES
NO TAX AREA
TAX RATE ASSETS OVER NO TAX AREA
OTHER REAL PROPERTY
Spouse and issue
Mortgage 2%
Cadaster 1%
Relatives up to the 4th degree and collaterals up to 3rd degree
Handicapped individuals
4% - 6% - 8% according to relationship
Italy has signed 96 tax treaties to avoid double taxation and these can be viewed here.
Tax information exchange agreements (TIEAs)
Italy has signed many TIEAs, and these can be viewed here.
Special rules on becoming tax resident
For tax purposes, individuals are deemed to be resident in Italy if, for the greater part of the fiscal year (183 days, 184 in leap years), they are registered as residents in any Italian Municipal register or are domiciled or resident in Italy under the Code (art.2 of the DPR 917/1986). Pursuant to the Code, domicile is the place where individuals establish the centre of their affairs and interests, while residence is the place where one usually lives.
Italian residents who change their residence to tax-friendly countries are treated as tax residents for tax purposes, unless they prove that they have effectively emigrated to the tax-friendly country.
Special rules on ceasing residence
When the conditions above in any single tax year are not satisfied there is no tax residence for that year.
Domicile concept for gifts and inheritance
Taxation of holdings by non-residents on death and of gifts
Gifts: not applicable.
Death: not applicable.
Reporting/auditing requirements
Asset protection laws
Yes. The general principle (art.2740 of the Civil Code) is that the debtor answers for his debts with all his assets, present and future. If the debtor disposes of their assets in a way that can be prejudicial to their creditor, the creditor has a clawback action pursuant to art.2901 of the Code.
Foreign currency restrictions
No.There are no foreign currency restrictions, however, there is an obligation to report transactions in foreign currencies with procedures varying according to the transaction.
Foreign ownership restrictions
No. There are no restrictions on foreign ownership, however, the tax resident has to declare real property abroad and financial assets held abroad and will be subject to income tax in relation to income, subject to conventions against double taxation, and to tax on real estate (IVIE).
AML/due diligence and other requirements and regulatory procedures for advisors
To establish a trust: applicable.
For incorporation: applicable.
To open a bank account: applicable.
Key resources for further information
Italian Ministry of Finance: www.finanze.it
Parliament of Italy: www.parlamento.it
STEP branches in Italy
There is one STEP branch in Italy
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Firms in Italy
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Members in Italy
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