In ruling no. 165 of 31 August 2026 the Taxpayers Division of the Italian Revenue Agency (Agenzia delle Entrate) returns to the taxation of foreign trusts, this time from a less travelled but operationally decisive angle: the “method of determining the income arising from a foreign transparent trust as regards a resident beneficiary” for the purposes of Article 44(1)(g-sexies) of the Italian Income Tax Code (TUIR).
The fact pattern is a familiar one in Italian-US family wealth: a California-law trust settled by a married couple, holding financial assets with US intermediaries and real estate located in the United States. On the father’s death the fund was divided into two derived trusts, a Survivor’s Trust and a Decedent’s Trust, in respect of which, as the statement of facts records, “the sole beneficiary of the derived Trusts is the mother for as long as she is alive”, the trust property being distributed on her death, “net of the expenses connected with the death and of the taxes due”, “in equal shares to the children, or to their heirs”. The mother remained trustee until 1 December 2021, from which date, under a deed amending the trust instrument, she became co-trustee together with the applicant’s brother and sister. The settlor died on 20 May 2025. One of the three daughters is tax resident in Italy and asked how the income attributable to her should be quantified.
The operationally decisive point is the fixing of the dies a quo: “The Applicant, being an identified beneficiary of a foreign trust as from 20 May 2025, is required to carry out the resulting tax obligations as from the 2025 tax period”. What triggers Italian income tax relevance is therefore neither the settlement of the trust nor the first death, but the acquisition of the status of identified beneficiary (beneficiario individuato), which Circular no. 34/E of 20 October 2022 anchors to holding the “right to require the trustee to allocate that share of income attributed to him by transparency”. Until the settlor’s succession opened, no such right existed, because during her lifetime the derived trusts had a single beneficiary, the mother.
As to quantum, the Agency refers back to the same Circular no. 34/E, under which “for the purpose of determining the income of a non-resident transparent trust to be attributed to the beneficiary, account must be taken of the rules laid down by the tax legislation of the State in which the trust is resident or established”. This is the practical heart of the ruling: the Italian taxable base is built by applying the tax rules of the trust’s own jurisdiction, without an item-by-item recharacterisation of the individual receipts under the TUIR categories, the resulting amount then reaching the beneficiary as investment income under Article 44(1)(g-sexies) TUIR. It is worth recalling that attribution operates “in any event”, that is, in the Circular’s words, “irrespective” of “actual receipt”, with the consequent friction against the tax already borne abroad by the trust, which Article 165 TUIR does not resolve given that the taxable persons differ. That last point is a matter of academic comment on which the ruling takes no position.
Consistently, the Agency rules out the application of Article 45(4-quater) TUIR, under which “where, in relation to distributions by foreign trusts, and by institutions of analogous content, to beneficiaries resident in Italy, it is not possible to distinguish between income and capital, the entire amount received constitutes income”. Although the wording refers generically to foreign trusts, Circular no. 34/E had already clarified that the presumption “applies, in principle, to opaque trusts established in privileged tax jurisdictions”, so that it has no room to operate where the trust is transparent and the beneficiaries are identified. The two levels must nonetheless be kept apart: ruling out the presumption, which is an evidentiary rule governing the internal split of a distribution, entails no characterisation of income accrued before the beneficiary was identified, the treatment of which remains governed by the regime applicable to the trust in the earlier phase.
Two methodological caveats, finally. The Agency makes clear that it has not ruled on the classification of the trust, which it takes as represented by the applicant, and the ruling is given “on the basis of the elements and documents submitted, accepted uncritically as set out in the ruling request”, binding only as between the Agency and the applicant.
