Inheritance in Italy When the Heir Lives Abroad: Understanding the Law

When an Italian citizen passes away in Italy and their heir lives abroad (often registered with AIRE), a common question arises: Which inheritance law applies, and where must taxes be paid?

This is especially relevant for heirs managing inheritance in Italy, including selling inherited property, navigating probate, and understanding how Italian inheritance law interacts with international circumstances.

Which Country’s Law Applies?

Italian law uses one main rule to decide: the tax residence of the deceased. If the person who passed away was tax-resident in Italy, then Italian inheritance tax applies to all their assets—no matter where those assets are located in the world.

This includes:

• Property and valuables in Italy
• Assets held abroad (like a foreign bank account or vacation home)

This is known as worldwide taxation and is outlined in Legislative Decree 346/1990.

In contrast, if the deceased had moved abroad and was no longer a resident of Italy, then Italian taxes only apply to property physically located in Italy. Foreign assets would be subject to taxation under the foreign country’s law—this is the territoriality principle.

What If You’re an Heir Registered with AIRE?

Let’s say you’re a US citizen inheriting property in Italy, and your Italian parent passed away while still living in Italy. Even though you live abroad and are registered with AIRE, Italian law still applies, and you must pay inheritance tax in Italy. Your AIRE status does not change the taxation rules.

However, living abroad may trigger double taxation, since your country of residence might also want to tax the same inheritance. To help avoid this, Italy has signed double taxation treaties with several countries, including the United States. These treaties can offer tax credits or define who gets taxing rights.

Assets Subject to Inheritance Tax in Italy

If the deceased was a resident of Italy at the time of death, Italian estate tax will apply to all of the following:

• Real estate and movable property in Italy (homes, bank accounts, jewelry, etc.)
• Foreign assets, such as foreign properties or investments

This can significantly affect Italian estate planning, especially in families with cross-border assets or multiple heirs abroad.

Filing the Inheritance Declaration

Regardless of where the heir lives, if Italian law governs the estate, the succession declaration must be submitted to the Italian Revenue Agency within 12 months of death.

This involves detailing all inherited property—whether in Italy or abroad—and calculating the taxes owed. The declaration must be filed electronically, and you’ll need an Italian tax code (codice fiscale) to proceed.

When the Deceased Was Residing Abroad

If the deceased parent had moved abroad and was no longer considered a tax resident of Italy, then only the assets physically located in Italy are subject to Italian inheritance tax. Assets abroad, such as a bank account in the U.S. or a home in Switzerland, would not be taxed by Italy but may still be taxed by the country where they are located.

Planning Ahead

Cross-border inheritances can be complex. To ease the process, many families explore legal tools such as donation in Italy during the parent’s lifetime. This may help reduce taxes and avoid probate issues.

Whether you’re planning your estate or managing an inheritance, especially as a foreigner inheriting property in Italy, it’s crucial to:

• Consult with a legal expert familiar with Italian succession law
• Understand both countries’ tax obligations
• Properly file required documentation to avoid penalties

VGS Family Lawyers is a law firm that specializes in family law matters such as inheritance, separation and divorce, child custody, and more.

In case you need assistance, please write to: info@vgslawyers.com.