They say that two things are inevitable in life: death and taxes. We don\’t much care for thinking about either. Inheritance tax is the one tax we don\’t pay until we are dead, so perhaps understandably it\’s a subject way down our list of priorities. When pressed, most people express the hope that their families, rather than the state, will inherit their wealth when they die. Western governments vary considerably in the extent to which they accommodate this basic human desire. To a greater or lesser degree, death taxes are nearly everywhere viewed as a legitimate tool for promoting the objective of social equality. Karl Marx, Andrew Carnegie and John Maynard Keynes had this in common: they all favored high inheritance taxes. However, this view is by no means universal: with a little planning and a global perspective, there are steps that can be taken to avoid the tax altogether. Indeed, there is some truth in the old assertion that inheritance taxes are paid only by the poorly advised.

Most countries, with the exception of the UK and USA, tax the beneficiaries of a will, rather than the estate itself. International comparisons are difficult, but the following details are illuminating:

• In the USA, a surviving spouse pays nothing. All other bequests above $1.5 US are subject to federal taxation at 45%, with additional local taxes pushing that figure above 50% in many states. When the current republican administration came into office in January 2001, the lower threshold was only $675,000: it has more than doubled in just 5 years. The USA now has the second-lowest inheritance taxes in the world.

The case of Italy, however, is the most interesting of all. Italian Inheritance and Gift Tax (Imposta sulle Donazioni e Successioni) was abolished in October 2001. As a result, there is now no inheritance tax whatsoever in Italy. Unlike the situation in Sweden, however, taxation was not increased in other areas to cancel out the inheritance tax saving: it is a genuine saving that applies to anyone domiciled in Italy, i.e. anyone not taxed by a foreign government.

The Italian government introduced this measure for two reasons. Firstly, it realized that the value of the tax gathered was little more than the cost of the bureaucracy required to administer it. Secondly, Italy has traditionally been a big exporter of capital – but the current Italian administration believes that Italy\’s best interests are served by reversing that flow.

Italy\’s efforts to attract capital into the country are almost guaranteed to be successful. Taking British buyers of overseas real estate as an example: when buying second homes abroad, 27% of them have in the past chosen Spain, 20% have opted for France, but only 1% have bought in Italy (source: British Office for National Statistics). However, when prospective British buyers were asked in a Barclays Bank survey where they intended to buy in the future, 30% said Spain, 14% said France – and 10% voted for Italy. Clearly, the stimulus provided by these beneficial fiscal changes is set to have a big effect on the Italian property market.

One other thing is also clear, though. Italian real estate might just be the best investment choice you could make for your children.

Gerald Smith is a technical consultant at Piedmont Properties, a real estate agency specializing in Italian vineyards. His website can be found at http://www.smithgcb.demon.co.uk

Writen By : Gerald Smith

Tags: France, Germany, Inheritance, investment, Italy, property, Spain, Sweden, tax, uk, USA