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In Italy, approximately 85% of businesses are family-owned, yet only 30% of them survive into the second generation. This low percentage is primarily due to inadequate planning of the generational transition.
There are several legal instruments available for generational business transfer, including:
- Will and generational succession
- Business donation during generational transfer
- Family pact and family business
- Transfer of assets into a trust
- Deed of allocation
- Family assets fund
- Fiduciary assignment
- Usufruct of shares or quotas
- Corporate demerger during generational transfer
- Family buy-out for generational renewal
This document focuses on generational and succession, considering Legislative Decree No. 139/2024 on Inheritance in Italy (see our dedicated article), which implemented the European Commission Recommendations No. 94/1069/EC (1994) and No. 98/C 93/02 (1998). These recommendations urged Member States to reduce the tax burden as much as possible for both direct and indirect transfers of businesses or business branches.
The Regulatory Framework: the Previous Inheritance law in Italy
Until 31 December 2024, the application of Article 3, paragraph 4-ter of Legislative Decree No. 346/1990 was subject to a fundamental requirement: the transfer of shares or quotas had to concern companies carrying out business activities. This condition automatically excluded pure holding companies and real estate companies, as they were deemed non-entrepreneurial.
This interpretation was also confirmed by the Italian Revenue Agency (Agenzia delle Entrate) — for example, in Ruling No. 552/2021, which stated that the benefit presupposed “the necessary and essential presence of the main object of the relief provision, namely the existence of a family business as a productive entrepreneurial entity worthy of protection […] also to prevent a potential loss of jobs.”
Jurisprudence also supported this position: the Italian Supreme Court (Corte di Cassazione), in Judgment No. 6082/2023, ruled that exemption from inheritance and gift tax did not apply to the transfer of shares in real estate companies lacking entrepreneurial activity.
With the entry into force of Legislative Decree No. 139/2024, the rule has been reformulated, finally allowing for a relaxation of previous restrictive interpretations. In specific cases, the requirement of business activity has been removed as a condition for benefiting from the tax exemption.
The inheritance tax exemption in Italy
Article 3, paragraph 4-ter of the Consolidated Text on Inheritance and Gift Tax (TUSD), as amended by Decree No. 139/2024, provides that transfers of businesses, business branches, shares, or quotas, including those carried out through family pacts (Articles 768-bis et seq. of the Italian Civil Code), to descendants or the spouse, are exempt from inheritance and gift tax.
In particular, the exemption applies to transfers involving entities or businesses that are:
- resident in EU Member States;
- resident in EEA (European Economic Area) countries; or
- resident in jurisdictions that ensure adequate exchange of information (White List jurisdictions).
The law identifies three main cases:
- Transfer of shares in corporations (società di capitali):
The exemption applies provided that, as a result of the transfer, the beneficiary acquires or increases control of the company under Article 2359 of the Civil Code, and maintains such control for at least five years.
Under the Civil Code, “control by right” means ownership of a shareholding or quota representing more than 50% of the voting rights in the general meeting. If the transferred shares concern non-corporate entities (e.g. partnerships) or businesses, the control requirement does not apply, as the concept of “control” does not exist for partnerships. - Transfer of shares in partnerships (società di persone):
In this case, the exemption depends on the beneficiary acquiring and maintaining ownership of the interest for at least five years. - Transfer of businesses or business branches:
Here, the exemption requires that the beneficiaries continue the business activity effectively for at least five years from the date of transfer. This applies when the transferred asset is not merely a shareholding, but a business entity directly owned by the deceased or donor. The successor must therefore continue to operate the business — either personally (if a sole proprietor) or through the partnership or company that received the transfer — for the required minimum period.
Failure to comply with or maintain the five-year continuity condition results in loss of the tax benefit, with the obligation to pay the taxes that would have been due at the time of transfer, along with any applicable penalties and interest.
Moreover, the legislator has clarified that the requirement of business activity applies only to business transfers, not to share transfers. Thus, it is no longer necessary for the transferred shares to belong to an operating company. Consequently, the generational transfer of a pure holding company, a real estate company for passive asset management, or a simple company can qualify for exemption, provided all other legal conditions are met.
Administrative Practice regarding family pacts
In this new legal framework, the Italian Revenue Agency, through Resolution No. 12 of 14 February 2025, provided clarification regarding the taxation of monetary payments or asset allocations made as compensation to non-assignee heirs. Specifically, the Agency stated that regarding a family pact, the exemption under Article 3, paragraph 4-ter, Legislative Decree No. 346/1990 applies only to the transfer of the business or shareholdings from the settlor to the designated heir.
Compensatory allocations to non-assignee legitimate heirs do not benefit from the exemption, as they constitute acts of liberality and are therefore subject to gift tax. The applicable rates and exemptions depend on the degree of kinship between the settlor and the beneficiary heir.
Administrative Practice regarding Trusts
Furthermore, in Ruling No. 170/2025, the Revenue Agency clarified that when a trust transfers assets to other trusts (“successive trusts”) designated as beneficiaries under the original trust deed, the operation constitutes an act of liberality subject to inheritance and gift tax.
The taxable event occurs when the trustee transfers the assets to the beneficiary trusts, as this entails an actual enrichment of the latter. This is not a mere internal reorganization but a genuine gratuitous transfer of assets.
The applicable tax rate is 8%, as provided under Article 7, paragraph 1, letter d) of Legislative Decree No. 346/1990, as amended by Decree No. 139/2024, since no kinship relationship exists between the settlors and the beneficiary trusts. Where real estate is involved, proportional mortgage and cadastral taxes also apply.
In summary, according to the Revenue Agency, the transfer of assets from one trust to beneficiary trusts is equivalent to a donation.
News for 2026
In conclusion, it should be noted that Legislative Decree No. 123 of 1 August 2025 has significantly intervened in the field of succession law. with particular regard to the Consolidated Act on Successions and Donations (Legislative Decree No. 346/1990), with the aim of updating its content and making it more consistent with the current regulatory and economic framework.
The decree will enter into force on 1 January 2026.
An in-depth article will investigate the most significant innovations. The reason is that they are expected to have a concrete impact on taxpayers’ estate planning.
