DIY Inheritance Tax Calculation: What Are the Risks?

Changes in Inheritance Tax: What Are the Risks of Self-Calculation?

The changes to the inheritance tax are now official, and taxpayers will be required to calculate the tax due on their own starting from January 1, 2025.
In case of an error in the DIY calculation, what are the risks?

Simplified Procedures Starting From 2025

The decree approving the changes in inheritance tax brings several simplifications, especially in the calculation and settlement procedures of the tax, which will be effective from January 1, 2025.

From next year, taxpayers will have to settle the tax independently within 90 days of submitting the inheritance tax return.
This return, for which additional modifications apply, can only be submitted electronically within 12 months from the opening of the inheritance.

Overview of the New Regulations

The innovations regarding inheritances had already been anticipated by the draft enabling act for tax reform in a generic sense.
The self-liquidation of the inheritance tax, introduced to simplify the calculation procedure, while not simple due to the calculations involved, carries the risk of incurring tax errors.

But what are the consequences for those who make a mistake? Let’s try to provide a comprehensive answer to this question by reviewing all the introduced changes.

Current Procedure and Risks

At present, there is a procedure for partial self-liquidation of the inheritance tax.
To be clearer, the submission of the inheritance application, necessary for registration with the Revenue Agency, requires the payment of a portion of the taxes due for the inheritance procedure to commence.

In simple terms, heirs are required to pay:

• 2% of the mortgage tax calculated on the value of the real estate assets in the inheritance;
• the classic cadastral tax of 1%, always calculated on the value of the inherited real estate;
• various small taxes linked to the inheritance: a fee of 32 euros for each request verifying the presentation of the inheritance, a stamp duty of 85 euros, a tax of 7.44 euros for what are called “search rights” to be paid in relation to the real estate properties included in the inheritance for each land registry, and a mortgage tax of 90 euros;
• a series of special taxes: a tax of 18.59 euros for the examination and declaration of succession, and two additional minor taxes of 3.72 euros and 1.24 euros.
  The first is to be paid for the compilation of each transcript note, while the second is related to the compilation of the first page of each transcript note.

Transition to Flat-Rate Tax

Starting from January 1, 2025, a flat-rate substitute tax will be applied regarding cadastral and mortgage taxes, stamp duty, inheritance and gift tax, registrations in real estate registers, and land registers, as well as special taxes and registration taxes.

While this new approach simplifies the inheritance tax calculation, it is not without risks.

Risks of DIY Calculation

Many may wonder why, despite the simplified calculation method, there are still risks associated with the inheritance tax calculation.

The simplicity in many tax procedures does not exempt from risks.
In the case of inheritance tax, the risk of error lies in the self-liquidation mechanism.

With the new provisions, where the taxpayer is entrusted with the entire calculation procedure under their own responsibility, the risk of error would significantly increase.
Is the DIY calculation, introduced to expedite the process, truly a good practice? Is it worth risking the inheritance tax calculation solely for immediate feedback?

Expert Advice and Considerations

It is important to understand that the inheritance declaration is not a notarial act but a tax obligation through which the State collects taxes on inherited wealth.
Even with the simplifications, preparing an inheritance declaration requires at least a basic understanding of the relevant civil code.
Therefore, despite the option to act independently, seeking assistance from a qualified professional is advisable, especially considering the need to calculate the tax independently.

Moreover, from January 1, 2025, the inheritance tax will apply not only to property transfers due to death but also to donations or gratuitous transfers.
The most concerning aspect, however, should be the self-liquidation of the tax following a DIY calculation.
The taxpayer will pay the self-calculated tax without waiting for the Revenue Agency’s notice.