| They say that two things are inevitable in life: death | | | | - In Spain, spouses have to pay 8.5% on legacies |
| and taxes. We don't much care for thinking about | | | | above EUR16,000 Euro ($19,000 US), rising to 34% on |
| either. Inheritance tax is the one tax we don't pay until | | | | legacies above EUR800,00 Euro ($974,000 US). There |
| we are dead, so perhaps understandably it's a subject | | | | is a partial-exemption system, but to benefit from it the |
| way down our list of priorities. When pressed, most | | | | beneficiary must keep any real estate asset at least |
| people express the hope that their families, rather than | | | | 10 years. When the surviving spouse dies, inheritance |
| the state, will inherit their wealth when they die. | | | | tax has to be paid again - but this time on 100% rather |
| Western governments vary considerably in the extent | | | | than 50% of the assets. The Spanish tax system |
| to which they accommodate this basic human desire. | | | | appears specifically designed to hit disproportionately all |
| To a greater or lesser degree, death taxes are nearly | | | | non-Spanish or second-home-owning beneficiaries. |
| everywhere viewed as a legitimate tool for promoting | | | | Sweden is an interesting case. Although inheritance tax |
| the objective of social equality. Karl Marx, Andrew | | | | has been abolished there, it now charges its residents |
| Carnegie and John Maynard Keynes had this in | | | | a wealth tax of 1.5% of their assets above |
| common: they all favored high inheritance taxes. | | | | £200,000 ($350,000 US) each year. This new |
| However, this view is by no means universal: with a | | | | wealth tax raises far more revenue than the old, |
| little planning and a global perspective, there are steps | | | | abolished inheritance tax. There has in fact been a net |
| that can be taken to avoid the tax altogether. Indeed, | | | | loss to the Swedish taxpayers as a result of this |
| there is some truth in the old assertion that inheritance | | | | reform. |
| taxes are paid only by the poorly advised. | | | | The case of Italy, however, is the most interesting of |
| Most countries, with the exception of the UK and USA, | | | | all. Italian Inheritance and Gift Tax (Imposta sulle |
| tax the beneficiaries of a will, rather than the estate | | | | Donazioni e Successioni) was abolished in October |
| itself. International comparisons are difficult, but the | | | | 2001. As a result, there is now no inheritance tax |
| following details are illuminating: | | | | whatsoever in Italy. Unlike the situation in Sweden, |
| - In the USA, a surviving spouse pays nothing. All other | | | | however, taxation was not increased in other areas to |
| bequests above $1.5 US are subject to federal | | | | cancel out the inheritance tax saving: it is a genuine |
| taxation at 45%, with additional local taxes pushing that | | | | saving that applies to anyone domiciled in Italy, i.e. |
| figure above 50% in many states. When the current | | | | anyone not taxed by a foreign government. |
| republican administration came into office in January | | | | The Italian government introduced this measure for |
| 2001, the lower threshold was only $675,000: it has | | | | two reasons. Firstly, it realized that the value of the tax |
| more than doubled in just 5 years. The USA now has | | | | gathered was little more than the cost of the |
| the second-lowest inheritance taxes in the world. | | | | bureaucracy required to administer it. Secondly, Italy |
| - In the UK, a surviving spouse again pays nothing. All | | | | has traditionally been a big exporter of capital - but the |
| other bequests above £275,000 (EUR396,000 | | | | current Italian administration believes that Italy's best |
| Euro or $483,000 US) are subject to taxation at 40%. | | | | interests are served by reversing that flow. |
| - In Germany, inheritance tax is paid by the beneficiary: | | | | Italy's efforts to attract capital into the country are |
| spouses pay 7% on legacies above EUR307,000 Euro | | | | almost guaranteed to be successful. Taking British |
| ($374,000 US), rising to 30% on legacies above | | | | buyers of overseas real estate as an example: when |
| EUR25.9 Million Euro ($31.5 Million US) on a sliding scale. | | | | buying second homes abroad, 27% of them have in |
| Non-spouse relatives pay 12% to 40%, and | | | | the past chosen Spain, 20% have opted for France, |
| non-relatives pay 17% to 50% on legacies above | | | | but only 1% have bought in Italy (source: British Office |
| EUR307,000 Euro ($374,000 US), both rising on a | | | | for National Statistics). However, when prospective |
| similar sliding scale. | | | | British buyers were asked in a Barclays Bank survey |
| - In France, as in Germany, inheritance tax is paid by | | | | where they intended to buy in the future, 30% said |
| the beneficiary. A surviving spouse pays 5% on | | | | Spain, 14% said France - and 10% voted for Italy. |
| legacies above EUR76,000 Euro ($92,000 US), rising | | | | Clearly, the stimulus provided by these beneficial fiscal |
| on a sliding scale to 40% on legacies above EUR1.776 | | | | changes is set to have a big effect on the Italian |
| Million Euro ($2.162 Million US). Other relatives pay at | | | | property market. |
| similar rates but with a lower tax-free allowance, while | | | | One other thing is also clear, though. Italian real estate |
| non-relatives pay at up to 60% with an almost zero | | | | might just be the best investment choice you could |
| tax-free allowance. | | | | make for your children. |