Italian 2026 Finance Bill – Key Tax Measures: Support for Middle and Low Incomes | Revision of IRPEF tax brackets | Abolition of reduced 21% rate on short term lettings | Baby bonus | Enhanced parental leave and nursery bonus | Social security exemption for working mothers | Increased deductions for private school expenses | Family endowment fund | First home mortgage guarantee fund | Support for food purchases | Energy-efficient appliance bonus | Cap on deductions for incomes over €75,000 | Exceptions for healthcare, mortgages, and startup investments | End of deductions for children over 30 (except disabled children) | “Hire more, pay less” tax deduction for new permanent hires | Reduced tax on productivity bonuses | Fringe benefit exemptions | Relocation support for new hires | Raised flat tax threshold for employees and pensioners | Reduced corporate tax (IRES) for reinvested profits | Tax credits for southern Italy investments | Enhanced “Nuova Sabatini” machinery financing | Support for SME stock market listings | Increased public investment in defense, infrastructure, and healthcare | Banking and Insurance | Deferred deductions for financial sector losses | Annual stamp duty on life insurance contracts

Italian Inheritance and Gift Tax

Italian Inheritance & Gift Tax: Key Rules (2025 Update)

Tax Rates by Beneficiary Relationship

  • Spouse and direct descendants (children, grandchildren): 4% with a €1 million exemption per beneficiary.
  • Siblings: 6% with a €100,000 exemption.
  • Other relatives up to the fourth degree: 6% with no exemption.
  • Unrelated individuals: 8% with no exemption.

See this article for a listing of degrees of kinship.

Residency-Based Taxation

IHGT applies to:

  • Italian tax residents (at time of death or gift): taxed on worldwide assets;
  • Non-residents: taxed only on assets located in Italy;
  • Trusts with specific rules.

However the rules applicable to the Territorial scope of the tax are complex.

Taxable Base Values

  • Real estate: taxed on the cadastral value, typically lower than market value.
  • Other assets: taxed on fair market value at the time of transfer

The Euro 1 million threshold

Legislative Decree 139/2024 abolished the Italian Inheritance and Gift Tax “succession aggregation” (coacervo successorio).   The Decree explicitly repealed the part of the law that required  the summing up lifetime gifts with the final estate,  for purposes of calculating  the Euro 1 million threshold applicable for gifts and legacies to spouses and direct descendants. 

The principle of “succession aggregation “(coacervo successorio), means that the values of past gifts and the final estate on inheritance were to be summed for IHGT tax purposes.  The legislation aligns prior Italian Supreme Court rulings that found succession aggregation to  be incompatible with the proportional nature of  IHGT.

The Decree maintains the gift aggregation (coacervo donativo) principle but separates its application between lifetime gifts and inheritance. This means that each gift needs to be checked to see if, together with the value of prior gifts made by the same person to the same beneficiary,  the value has exceeded the tax-exempt threshold.  The value of the estate passing on succession to a spouse/child will benefit from a separate Euro 1 million threshold. 

The Decree provides that gifts made during from 2001-2006 should be excluded from the aggregation with amounts passing on death. 

Lifetime gifts and transfers by way of inheritance now have separate exemptions, allowing up to €2 million tax-free per spouse/child (gift + inheritance).

This effectively allows up to Euro 2 million tax-free threshold per qualifying beneficiary.

Tax-Exempt Assets

Business Assets

  • Family-owned businesses (including shares in closely held companies) may be exempt if:
  • The business is transferred to spouse or direct descendants.
  • The heirs continue the business for at least 5 years.
  • A formal declaration of continuation is filed with the Revenue Agency.

Applies to sole proprietorships, partnerships, and corporate shares.

No tax due if conditions are met.

Government Bonds and Similar Securities

Italian government bonds (e.g., BTPs, BOTs, CCTs) are fully exempt from inheritance and gift tax.

EU government bonds may also qualify if held by Italian residents, as may bonds issued by a non-EU if bilateral arrangements permit in the circumstances.

Exemption applies to both principal and accrued interest.

Primary Residence

If inherited by spouse or children who continue to reside in the property, the property transfer is exempt from IHGT.

This applies only to one primary residence per beneficiary.

Cultural and Historic Assets

Assets of artistic, historical, or cultural value registered with the Ministry of Culture may be exempt.

Conditions include preservation obligations and restricted sale rights.

Life Insurance Policies

Life insurance payouts are not subject to inheritance tax, regardless of amount or beneficiary.

This makes life insurance a powerful estate planning tool in Italy.  A charge to Italian income tax on the accrued yield or gain on with-profits or unit linked policies will likely apply.

Pension Rights and Severance Pay

TFR (Trattamento di Fine Rapporto) and certain pension entitlements are exempt from IHGT when transferred to heirs. In terms of pension Italian rules refer to  Italian statutory social security schemes and schemes managed by a Regulated Italian pension fund manager.  Non discrimination rules under EU rules or a bilateral IHGT treaty may operate to extend the exemption to regulated pension schemes in another jurisdiction. Note there is no non discrimination clause in Italy’s treaty with the UK. 

Recent Blog Posts