Bologna, 22 April 2024 – Succession And donation: what changes? What are the new rules introduced by decree preliminarily approved by Cabinet? To clarify it is Alberto Valerianipresident of Notary Council of Bolognainterviewed to understand the merits of some steps of the reform.
Let’s start from the basics. The difference between donation and inheritance?
“The donation is an act of transfer of goods made free of charge from a living person to another, with the intention of providing the latter with a benefit. It is said with a liberal intent. Succession, on the other hand, is the phenomenon that regulates the transfer of assets upon the death of a person to his heirs”.
How are inheritance and gift taxes regulated?
“The methods for determining the tax are the same. The rates are the same (4%, 6% and 8%) and both have minimum amounts for certain subjects such as spouse, children and siblings within which the tax is not applied. The deductible for spouse and children is 1,000,000 euros for each: in the case of a spouse and two children the deductible is a total of 3,000,000 euros, and for siblings it is 100,000 euros, again for each. The 4% rate applies to spouses and children, 6% to siblings and relatives up to the fourth degree and 8% to other relatives and strangers”.
Are there other taxes in the case of donations and inheritances?
“When the object of the donation or inheritance is real estate, the transcription and cadastral transfer taxes must be paid (2% and 1%). In the case of a ‘first home’, instead of 3% on the value, fixed taxes of 400 euros. Property taxes are always the same, whether in the case of a spouse or children, siblings, other relatives or strangers”.
What does the reform currently being published consist of?
“Given that the final text cannot yet be consulted in official form, I must point out that the reform should not bring about any substantial innovation, despite having a content that is certainly appreciable for us operators. It is mainly a question of adaptations of the legislative text to previous guidelines of the Court of Cassation, or corrections to previous rules which had undergone a very restrictive interpretation by the Revenue Agency. These are therefore not absolute innovations”.
Like the jumble? “Yes, an important legislative change has been made to the accumulation, a rather incomprehensible word which I would prefer to replace with “accumulation” and which consists in the circumstance in which the excess of the exemptions (and therefore the tax liability) can also occur by adding together several donations and, before an important ruling of the Court of Cassation in 2017, also adding assets received through donation and assets received through inheritance. To simplify: a donation to the spouse of 500,000 euros and another donation of 600,000 euros must “cumulate” and therefore determine the payment of the 4% tax on 100,000 euros, i.e. on what exceeds the 1,000,000 euro exemption. Before the Supreme Court ruling this could happen even if the second was not a donation, but an inheritance. The Supreme Court of Cassation has established that the “cumulation” must only be made between multiple donations, and not between a donation and succession. Now the Government Reform has aligned the text of the law with the orientation of the Supreme Court”.
Is the tax burden of donations and inheritances in Italy high?
“No, especially within the family it is very small. To get an idea, just know that in Germany the tax can reach 50%, in the United Kingdom 40% and in France 60%. And it is not just a question of reduced rates and high deductibles, but other circumstances must also be taken into account, namely that properties must be valued at their ‘land registry value’, almost always far lower than the real value, and shares and company shares they must be valued on the basis of the company’s net worth which, without going into too much detail, can be much lower than the actual value of the company. To give a practical example, in the case of hereditary assets devolved to a spouse and two children in which there is the house used as a family residence of 150/200 meters and the holiday home of 100/150, as well as cash for 300 /400/500,000 euros, the inheritance tax is zero, the property taxes are 400 euros on the residence house and 3% on the cadastral value of the holiday home (possibly 3,000 euros).
Are there any new developments regarding shares and shares?
“Since 2007, in order to facilitate the generational passage of the company without burdening it with taxes, donations and inheritances involving shares and company shares in the presence of certain conditions are completely exempt from taxes, provided that the shares and shares are not sold for at least 5 years. The current Reform has rewritten the law by eliminating numerous doubts and eliminating some interpretations adopted by the Revenue Agency which greatly reduced the scope of the exemption”.
Does the reform also affect the Trust?
“The Trust is an institution governed by Anglo-Saxon law also applicable in Italy. A banal example: a person, worried about leaving the assets to his still young children, instructs the Trustee to administer the assets, to make the annuities available for the children and to transfer the assets to them only upon reaching a certain age. Before the Reform, the transfer of assets to the Trustee was exempt from tax and the tax (donation/inheritance) applied only at the moment of transfer of the assets to the beneficiaries, according to the tax rules in force at that time. The Reform allows you to opt either for this type of taxation (deferred, but uncertain as to what the applicable taxation will be as it is regulated by the law that will be in force at the time of transfer of the assets to the beneficiaries) or for immediate taxation (therefore not deferred, but safe as regards the amount, because it is regulated by the law in force)”.
How are donations or inheritances to non-family members taxed?
“In the case of a donation or inheritance to a non-relative, the rate is 8% without applying any “discount” (i.e. without deductible)”.
Tags: simple explanation notary Bologna
