...nothing can be said to be certain except death and taxes.

"In this world nothing can be said to be certain except death and taxes".  

You, no doubt, have heard this said many times. I have! But where does it originate from?  Doing a quick online search I find that it has been attributed to quite a number of individuals but the most famous seems to be Benjamin Franklin. 

However, in today's financial climate we should maybe adjust this to read: 

"In this world nothing can be said to be certain except death and the ultra rich evading taxes by using Panamanian offshore companies"

The latest in leaked financial information to the press really is quite disturbing.  It is hard to stomach that no matter how much and how hard you work, there is always a very wealthy person out there who has rich school friends/buddies from the golf club or political ties, and with their help is paying a lot less tax than you.  Let's hope there are more leaks of this nature to get the governments to finally make these practices illegal.

So, why am I ranting about tax again? 

Well whilst David Cameron and family are shuffling money around the world to avoid paying their rightful taxes we, in Italy, are subject to the ever changing rules. 

Now, it is not often that I am party to proposal documents in relation to changes in Italian tax legislation but I recently became the recipient of just such a thing.  A proposal for a change to the Inheritance tax laws in Italy!

Now, I think that it should be said that when it comes to Inheritance taxes Italy is actually considered a fiscal paradise.  Italy's inheritance tax rates are comparable to those of Switzerland!  In terms of its standing in Europe, where Germans pay approx 30% inheritance tax and the Brits pay approx 40%, then Italy's succession taxes are minimal by comparison.  If you need a quick reminder of how they are applied then here they are: 

If your estate is passed to your spouse or relatives in a direct line (i.e children) then they are required to pay 4% on the value of their inheritance that exceeds € 1million.

* Brothers and sisters must pay 6% with an allowance of €100,000

* Other relatives must pay 8% but without any allowance.

Despite Italy having approx 1.5 million people who are subject to Inheritance tax each year with a combined value of approx €56 billion, the tax collection is relatively small due to the high allowances and also the fact that that 'successione' for a property is based on the catastale value, not the market value.

However, this is all set to change if the proposal document is anything to go by.  But before you start to worry, let me explain that for most people not much will change.  The changes are designed to catch high net worth individuals.  Thankfully, a regulation which protects the less wealthy and allows a distribution of family assets to the next generation. 

The proposals are as follows: 

*  Direct line relatives, i.e parents and children, will be able to receive donations and inheritances with a reduced allowance of €500,000 each (instead of €1 million).  After which the tax will rise from 5% to 7%

*  Brothers and sisters will receive an allowance of €100,000 each after which tax will apply at the new rate of 8%

*  Relatives up to the fourth degree, parents in-law and in-laws up to the third degree will not receive an allowance and a tax rate of 10% on the inheritance. 

*  Anyone else pays 15% on their inheritance. 

If any individual beneficiary's inheritance exceeds €5 million then the rates applied above will be tripled. 

It has also been proposed that Life Assurance policies will maintain their tax exempt status under the new rules, so you will continue to enjoy that benefit as well if you are investor with SEB Life International, Hansard or Canada Life.  However, the rules about what makes a tax exempt Life Assurance wrapper, where it is being used as an investment, are also changing. We are mindful of this and are watching carefully any developments. (maybe an E-zine on this topic in the near future!)

On the face of it this all appears to be good news for most.  The law has yet to be passed and something similar was proposed back in 2015.  I will keep you updated on any further developments because they may decide yet to catch more people in the inheritance tax trap to bring Italy more in line with the rest of Europe.

If you are in any way confused about your own inheritance tax liabilities and would like to try to plan around your respective tax regimes relating to succession or in general, then you can contact me on gareth.horsfall@spectrum-ifa.com or call me on +39 3336492356