Why Italy is (almost) a tax haven for inheritance tax

(and why in 2026 it will become a key jurisdiction for international planning)

When it comes to tax havens, Italy is hardly ever mentioned. Yet, if we look at the issue of inheritance tax from a technical and comparative perspective, our legal system is currently among the most favorable in the developed world. Low tax rates, very high exemptions, an often reduced tax base for real estate, and favorable regimes for the generational transfer of businesses make Italy an anomaly in the OECD landscape.

This position is set to strengthen in 2026, in a global context characterized by increasing tax pressure on large estates. While many Anglo-Saxon and European countries are tightening inheritance rules for budgetary and redistribution purposes, Italy maintains a system that rewards family, business continuity, and long-term stability.

For high net worth individuals (HNWIs), the choice of tax residence is no longer just about income taxation, but increasingly about protecting wealth for future generations. It is in this scenario that Italy becomes a jurisdiction of choice, provided, however, that its limitations are well understood, in particular the issue of double taxation with the United Kingdom and the United States.

How inheritance tax works in Italy

Italian inheritance tax is governed by the Consolidated Law on Inheritance and Donations (Legislative Decree 346/1990) and is based on two key criteria:

• residence of the deceased at the time of death;
• location of the assets.

If the deceased is a tax resident in Italy, the tax applies to assets wherever they are located (with credit mechanisms for foreign taxes). If the deceased is not a resident, the tax only applies to assets located in Italy, such as real estate, businesses, or Italian shareholdings.

However, the distinctive feature of the Italian system is the leniency of the levy for the immediate family. For spouses and direct relatives (children, parents), the rate is 4%, but it only applies to the portion exceeding an allowance of €1,000,000 for each beneficiary. This means that a family with two children can transfer up to €3 million (€1 million for each child plus the spouse’s share) with little or no tax.

The rates only increase for more distant relatives or individuals outside the family, but in the vast majority of international estate planning, the focus is on direct descendants, who benefit from the most favorable treatment.

Why Italy is so competitive: real estate, business, and planning tools

Italy’s advantage does not stem solely from tax rates. The tax base plays a decisive role.

For real estate, the value to be declared in succession is often the revalued cadastral value, which in practice can be much lower than the market value. This allows the taxable amount to be “contained” and, in many cases, to remain within the exemptions even in the presence of valuable properties.

Added to this is the favorable regime for the generational transfer of businesses and controlling interests. Under certain conditions of continuity (generally maintenance for at least five years), the transfer to a spouse and descendants can take place with total exemption from inheritance tax. For entrepreneurs and industrial families, this makes Italy particularly attractive compared to many OECD countries, where business succession is fiscally penalizing.

Furthermore, in 2026, the Italian regulatory framework appears to be more rationalized and predictable than in the past, with greater clarity on compliance, self-assessment of tax, and the treatment of instruments such as trusts. This element of legal certainty is often underestimated, but it is crucial for planning with a 20- or 30-year horizon.

International comparison: where inheritance costs much more

Italy’s position stands out when compared with other jurisdictions.

In France, the rates for children are progressive and can quickly reach 45%, with much lower exemptions. In Belgium, especially for distant relatives or unrelated individuals, taxation can be almost expropriatory. In Germany and Spain, despite regional and structural differences, the inheritance tax burden remains higher on average than in Italy.

In Anglo-Saxon systems, the contrast is even more striking. In the United Kingdom, inheritance tax affects the entire estate of the deceased at a standard rate of 40% above relatively low thresholds. In the United States, the federal estate tax applies the same rate of 40% on the portion exceeding the federal exemption, to which state taxes may be added.

In this scenario, Italy is one of the very few major Western economies where inheritance tax for the family unit remains stable at a single digit.

The sensitive issue for the UK and US: double taxation

However, defining Italy as an “inheritance tax haven” requires a fundamental clarification for a British or American audience.

Transferring tax residence to Italy does not automatically cancel inheritance tax in the country of origin. The UK and US use different connecting criteria from Italy: in the UK, long-term resident status is now relevant, while in the US, citizenship counts. The result is that an individual may find themselves, at least for a certain period, exposed to two inheritance systems.

The double taxation agreements signed by Italy with the UK and the US prevent the same asset from being taxed twice ‘in full’, thanks to tax credit mechanisms. However, when the foreign tax rate is much higher (40% compared to 4% in Italy), it is normally the foreign rate that ‘dominates’ the final result.

For this reason, moving to Italy should be seen as a planning process, not as an instant solution.

Two practical (simplified) examples

Example 1 – British citizen

Situation

• British citizen with total assets of €4,000,000
• Heirs: wife + 2 children
• Moves to Italy in 2026 and dies in 2027

Effects in Italy

• Each child benefits from an allowance of €1,000,000
• Most of the assets fall within the allowances
• Italian inheritance tax: very low (often zero or a few tens of thousands of euros)

Effects in the United Kingdom

• If the individual is still considered “connected” to the UK (e.g., as a long-term resident), the estate may be taxed at 40%.
• The Italian tax becomes a credit, but does not automatically eliminate the 40% UK tax.

Key message

• Italy drastically reduces Italian taxation.
• To truly avoid the 40% UK tax, time and planning are required.

Example 2 – US citizen

Case A – Assets below the federal threshold

• Assets: $10,000,000
• Resident in Italy
• Heirs: 2 children

Result

• US: in many cases, federal estate tax is zero
• Italy: very low inheritance tax

Case B – Assets above the federal threshold

• Assets: $25,000,000

Result:

• US: the portion exceeding the threshold is taxed at 40%
• Italy: applies exemptions and low rates
• Credits avoid full double taxation, but US tax remains the dominant factor

Key message

• Italy does not cancel the IRS
• But it avoids a second heavy tax layer and makes the European portion of the estate efficient

Why it still makes sense to plan in Italy in 2026

Despite the limitations highlighted for the UK and the US, basing your planning in Italy offers structural advantages: low domestic taxation, family protection, exemption for business transfers, favorable cadastral values, and an increasingly clear and stable system. Added to this are attractive tax regimes for new high-net-worth residents, which complete the competitive picture.

Conclusion

Italy is not a tax haven in the classic sense. However, it is increasingly clearly a safe jurisdiction for international estate planning. In 2026, for those who plan ahead and take a professional approach, transferring residence to Italy can translate into structural estate savings for the entire family. This is on condition, however, that the issue of double taxation is addressed realistically and that the strategy is developed together with advisors who have in-depth knowledge of both the Italian and Anglo-Saxon systems.

Are you considering transferring your residence to Italy or protecting your international assets?

Cross-border estate planning requires technical analysis and coordination between jurisdictions.

👉 Contact Taxdry for specialist advice on your situation.