Gifts and Inheritance Under Italy's Flat Tax: Passing On Foreign Wealth
During the flat tax, Italian gift and inheritance tax applies only to Italian assets. What counts as Italian, trusts after the 2024 reform, timing and the limits abroad.
The flat tax is usually discussed as an income tax regime. For families with significant wealth abroad, its effect on gifts and inheritance can be just as important. During the years of the regime, the transfer of foreign assets by the person who opted is outside Italian gift and inheritance tax, however large the estate and wherever the heirs live.
The rule is simple to state and full of details in practice: what counts as an Italian asset, how trusts are treated after the 2024 reform, what happens when the regime ends, and what your former country still claims. This article goes through each, with the planning opportunities and the limits.
The Rule
Law 232/2016, the law that created the flat tax, provides that for inheritances opened and gifts made in the tax years in which the option is valid, Italian inheritance and gift tax is due only on assets and rights existing in Italy at the time of the transfer. Normally, an Italian resident who dies or makes a gift is taxed on worldwide assets. Under the flat tax, the territorial scope shrinks to Italy.
In circular 17/E of 2017, the Revenue Agency read the word “gifts” broadly: the rule covers all gratuitous transfers subject to gift tax, including transfers into trusts and other forms of segregation of assets. The exemption follows the person who opted, so it applies regardless of who receives the assets and where they are resident. It applies also to the family members included in the option, for transfers they make themselves.
What Counts as an Italian Asset
The definition comes from article 2 of the inheritance tax code and is broader than many clients expect. Assets registered in Italian public registers, such as Italian real estate or a yacht under the Italian flag, are Italian. So are shares and interests in companies and entities that have their registered office, their place of administration or their main business purpose in Italy, bonds issued by the Italian State or by Italian companies, and claims against Italian-resident debtors.
The “main business purpose” test deserves attention. A foreign company whose main activity is holding Italian real estate may be treated as an Italian asset, and so may its shares. Wrapping an Italian villa in a foreign company does not automatically make it foreign.
Trusts After the 2024 Reform
Legislative Decree 139/2024 reformed the taxation of trusts for gift and inheritance tax purposes from 2025. As a rule, tax is now due when assets are transferred to beneficiaries; but the settlor can choose to pay it upfront, when assets are transferred into the trust.
For a flat tax resident, that choice can be powerful. A transfer of foreign assets into a trust during the regime is outside Italian gift tax. If the upfront option is chosen, the tax position is fixed at that moment, at zero for foreign assets, even if the distributions to beneficiaries happen years later, after the regime has ended. The point has been discussed in the professional literature, notably in a 2024 Eutekne analysis, but still awaits official confirmation. For a large settlement, it is a case for an advance ruling.
Timing: the Benefit Lasts as Long as the Regime
The exemption applies to gifts made and inheritances opened while the option is valid. After fifteen years, or after a revocation, Italian residents are again subject to gift and inheritance tax on worldwide assets. The Italian Notaries’ Council has also warned that a later forfeiture of the regime, for example because the substitute tax was not paid, could put the exemption at risk. Paying the €300,000 on time each year is therefore also a condition of the estate plan.
For this reason, many families use the regime years to carry out gifts, settle trusts or reorganise holding structures, rather than relying on the regime still being in place at the time of death.
Italy Is Only One Side of the Equation
The Italian exemption does not bind other countries. A US citizen remains subject to US estate and gift tax wherever he lives. The United Kingdom, since April 2025, taxes the worldwide estate of long-term residents for several years after they leave. Other countries tax heirs who live there. The Italian rule removes Italy’s claim; it does not remove theirs. A cross-border estate plan must look at every country involved: the donor’s former residence, the location of the assets and the residence of the heirs.
Ordinary Italian Rates, for Perspective
Even outside the flat tax, Italian gift and inheritance tax is moderate by international standards: 4% for spouses and children above a €1 million allowance per beneficiary, 6% for siblings above €100,000, 6% for other relatives and 8% for others. The flat tax exemption is most valuable for very large foreign estates, for transfers to non-family beneficiaries and for families who want certainty during a long period of residence. For Italian assets, tools such as gifts of bare ownership or a società semplice remain available.
Our View
The gift and inheritance exemption turns the flat tax into an estate-planning tool, but only for foreign assets and only during the regime. Map which assets are Italian under the broad legal definition, use the regime years for the transfers that matter, consider the upfront option for trusts, and coordinate with every other country that may claim the estate. Where the amounts are large, an advance ruling and a coordinated plan for inheritance tax planning are worth the investment. Remember too that some assets you still report in Italy, such as those in excluded countries, are also those that remain taxable here.
Frequently Asked Questions
Do flat tax residents pay Italian inheritance tax?
Only on assets located in Italy, for inheritances opened while the option is valid. Foreign assets are outside Italian inheritance tax.
Are gifts by a flat tax resident taxed in Italy?
Gifts and other gratuitous transfers made during the regime are taxed only on Italian assets, regardless of where the recipients live.
Can I put foreign assets into a trust tax-free under the flat tax?
Transfers of foreign assets into a trust during the regime are outside Italian gift tax. Whether paying upfront fixes that result for later distributions still awaits official confirmation.
What counts as an Italian asset for inheritance tax?
Italian real estate and registered assets, shares in companies with their seat or main business purpose in Italy, Italian bonds and claims against Italian debtors, among others.
What happens when the flat tax ends?
Gifts and inheritances after the end of the regime are subject to Italian tax on worldwide assets under the ordinary rules.
Does the Italian exemption protect me from my home country's estate tax?
No. Other countries, such as the United States for its citizens or the UK for long-term residents, may still tax the estate.
Avv. Marco Mesina
Founder, Move to Dolce Vita · Avvocato, Milan Bar (Ordine degli Avvocati di Milano)
Marco is an Italian tax lawyer who advises individuals and families relocating to Italy on tax regimes, residency, citizenship, real estate and succession planning. Before founding Move to Dolce Vita he worked at Watson Farley & Williams, Withers and Deloitte in Milan.
- Milan Bar
- Citywealth Top 50 Italian Advisors 2025 & 2026
- Profiled by Forbes (2024)
- English · Italian · Spanish
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