Gifts and handing over the family business

Paolo, 68, owns all the shares of his limited company and a flat worth €400,000. He gives the flat to his daughter: below the one-million allowance, gift tax is zero, but mortgage and cadastral taxes come to €12,000. He gives the shares to his son, who works in the business: no tax at all, provided the son keeps control of the company for five years.

The gift: the same rates, a notarial deed

Whoever receives a gift pays a tax built just like inheritance tax. Rates and allowances depend on the relationship between donor and recipient, and only the value above the allowance is taxed. The agency's fact sheet on gift tax rates lists the same figures that apply to estates.

The spouse and direct-line relatives pay 4% above one million euros each; brothers and sisters 6% above €100,000. Other relatives up to the fourth degree and the in-laws named by law pay 6% with no allowance, and everyone else 8%.

For gifts too, when the recipient has a severe disability the tax reaches only the part above €1,500,000, and the agency's fact sheet specifies that this holds whatever the degree of kinship with the donor.

Where gifts differ from estates is procedure. A gift is made by public deed, drawn up before a notary. The notary registers the deed with the agency office within 30 days and pays the gift tax on registration, so the recipient files no return of their own.

Along with gift tax, the notary pays registration tax at a flat €200. There is a welcome exception: when the gift does not exceed the allowance, registration tax is not due. A parent's gift to a child below one million therefore does not even pay those €200.

Who actually pays? The tax falls on the recipient, but the notary is the one who pays it on registration. Before booking the signing, ask the notary for an exact statement of the taxes to be provided, especially when the gift includes property.

Gifts of property

When the gift is a property or a right in rem over one, 2% mortgage tax and 1% cadastral tax are added to gift tax, both computed on the value of the property. As with inheritance, they are due even when the allowance wipes out the gift tax.

If the recipient meets the first-home conditions, both taxes become fixed at €200 each. It is the same relief granted to heirs, and it transforms the cost of a parent giving a home to a child who will live in it.

Anyone who receives the home they will live in and claims the first-home relief also takes on its commitments: moving residence within the deadline, and not selling or giving it away within five years unless another main home is acquired within a year.

Transfers the tax leaves out

Article 3 of the consolidated act lists the transfers the tax does not reach, by inheritance or by gift. Paragraph 1 excludes those in favour of the State, regions, provinces and municipalities, public bodies, recognised foundations and associations whose sole purpose is welfare, study, research, education or training, and non-profit organisations known as ONLUS.

Other public bodies and other recognised foundations or associations are exempt only if the legacy or gift is made for those same purposes. The recipient must then show within five years that the assets were used for the stated aim; otherwise it pays the tax with statutory interest.

The rule also covers bodies set up in other EU or EEA countries and, subject to reciprocity, in any other country. Paragraph 4-bis adds transfers to political movements and parties.

In practice, a legacy or gift to a recognised foundation devoted solely to scientific research pays no tax, whatever the amount. The same legacy to an unrecognised association, or to a body with aims outside the list, is taxed at the 8% rate that applies to unrelated recipients.

Passing the business to the family

For anyone running a family business the key provision is paragraph 4-ter. Transfers of a business or a branch of it, of partnership interests and of company shares to descendants and the spouse are not subject to the tax, whether made by inheritance, by gift or through a family pact governed by the Civil Code.

For resident corporations the relief does not cover any holding whatsoever. It applies only to shares through which the recipient gains control under article 2359, first paragraph, number 1, of the Civil Code, meaning a majority of votes at the ordinary shareholders' meeting, or tops up control they already had.

In return the law demands five years of continuity from the date of transfer. A recipient of a business must carry on trading; a recipient of controlling shares in a corporation must keep control; a recipient of other partnership or company interests must keep holding them.

The commitment must be stated formally, in the estate return, the gift deed or the family pact. If the conditions are then broken, the relief is lost: ordinary tax becomes due, together with the penalty under article 13 of Legislative Decree 471 of 1997 and late-payment interest from the date the tax should have been paid.

The commitment is not a formality to add afterwards. It must be given at the time of the deed or the return, and its content depends on what is transferred: carrying on the business, keeping control of a corporation, or keeping ownership of other interests. Have the notary or the adviser preparing the return check it.

The wording of paragraph 4-ter described here is the version in force since 2025, rewritten by Legislative Decree 139 of 2024 for estates opened and gifts made from that date. Earlier versions were worded differently: before planning, always check the date of the transfer and the text that governs it.

Reselling a property you received

A transfer without payment also has consequences for income tax when the recipient later sells. Article 67 of the TUIR taxes the gain on selling property bought or built no more than five years earlier, but expressly excludes property acquired by inheritance: selling an inherited home triggers no tax on the gain.

Property received as a gift follows a different rule. The five years do not start from the gift but from the date on which the donor bought the property. If a parent had owned the home for twenty years, a child who receives it and sells straight away makes no taxable gain.

Where the gain is taxable, the seller may ask the notary, on the sale, for a 26% substitute tax in place of ordinary income tax. It is a choice to make with the figures in front of you, compared against ordinary taxation.

Giving during your lifetime or leaving it by will

As far as the tax on transfers without payment goes, giving during your lifetime and leaving assets by will cost the same: the same allowances, the same rates, the same taxes on property. The differences lie elsewhere, in procedure, timing and what happens if the recipient sells.

The choice between the two rarely turns on tax alone. Other family members' rights, the wish to keep income or control while alive, and how ready the recipient is all come into play. This course stops at the tax side; for the rest, a notary's advice is needed.