Inheritance, the tax authorities cannot 'destroy' the annuity
Old calculations on taxable income measured according to legal rates illegitimate
Key points
A 77-year-old woman who received an inheritance annuity of 18,000 euros per year was asked by the tax authorities to pay inheritance tax of 216,000 euros. Having received the stellar bill, equal to 12 years of the annuity subject to the tax, the lady obviously started a legal battle that, through the tax section of the Supreme Court, ended up at the Constitutional Court. The Constitutional Court, in its ruling 89/2026 filed yesterday (editor Luca Antonini) declared the illegitimacy of the old Article 17 of Legislative Decree 346/1990, the one that generated the super-tax and that was applied until the reorganisation of the matter that took place with the implementation of the tax delegation (Legislative Decree 139/2024).
The story is curious, especially about a tax, the inheritance tax, at the centre of recurrent debates on its excessive levity in comparison with many foreign countries.
But if the tax is so light, how could it have generated such disproportionate claims as to be declared illegitimate by the Constitutional Court on the basis of the principle, the crucial heart of the matter because it offers a more general lesson, that regulations cannot go so far as to 'fiscally destroy an institution'?
The Calculation
The crux lies in the way inheritance tax is calculated in the case of the annuity, which is similar to that of the usufruct. In extreme summary, the taxable amount is measured in the 'present value' of future payments generated by the annuity. And this present value is based on a coefficient that is inversely proportional to the interest rate, because if interest is high, the expected nominal value in the future naturally decreases.
In usufruct, however, the coefficient for establishing the value of the annuity is in turn multiplied by theinterest rate, which when low drastically reduces the taxable income. However, this multiplication does not affect the annuity, whose value is 'already known in re ipsa', as the law judges note in their ruling. With the consequence that the taxable income rises when rates are low and coefficients high.
