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New Guidelines about Trusts and Taxation

New Guidelines about Trusts and Taxation
After a long gestation, with Circular Newsletter No. 34/E the Italian Revenue Agency provides the long-awaited official guidelines about trust and taxation in Italy, setting some milestones on direct and indirect taxation, as well as on tax monitoring obligations with interesting positions applicable to International and cross border wealth and trust structuring.

The Circular seems to reflect many of the instances of professionals who, including our firm, have contributed to the tax dialogue on the subject after the initial official draft was published on August 11th, 2011. Indeed, the Agency must be credited with a strong focus on making their interpretation clear, thus contributing to improve the dialogue with taxpayers and making these ductile tools even more attractive for clients, both with a domestic or International setting.

There are many items of emphasis in the 65 pages of Circular no. 34/E. We will have the opportunity to go soon into this in more detail, but in the meantime, it is useful to point out the following.


  1. Income Tax, Low Tax Jurisdictions and distributions to beneficiaries

From 2007, trusts are taxable entities in Italy (art. 73 of the Italian Consolidated Tax Act– D.P.R. n. 917/1986 (“ITCA”)) and subject to IRES (corporation tax). Within the general rules, in 2019 a relevant law amendment entered into force on the income paid to Italian tax resident beneficiaries of foreign trusts (and similar institutions).

It has been clarified that if the opaque trust is ‘established’ in low-tax jurisdictions, the ‘attributions’ of income by the trust to the beneficiary (even if not “vested”) are subject to progressive taxation in the hands of the same beneficiary as capital income on a cash-basis.

In this case, in fact, the reduced taxation in the hands of the foreign trust corresponds, in any case, to the taxation in the hands of the resident beneficiary for the allocations by the trust.

Moreover, foreign states are considered low-tax jurisdictions with exclusive reference to the treatment of income generated by the trust resident there. Thus, the element that is taken into consideration is the tax treatment of the trust. Specifically, are ‘low-tax jurisdictions’ the States and territories, in respect to which the income produced therein, integrates a nominal level of taxation lower than half of the level of taxation applicable in Italy. Special tax regimes applicable to the foreign trust shall also be taken into consideration to verify the nominal level of taxation. Therefore: as the nominal corporate tax rate in Italy is 24%, any trust on which income is taxed at less than 12% is to be classified as being from a ‘low-tax’ jurisdiction for Italian tax purposes. The Tax Authorities concede that for certain categories of income (e.g., trustees owning only financial income from savings and capital gains) the effective rate in Italy is 26% and therefore 13% is the threshold.

As per the term ‘established’, the definition of which was controversial in the original draft, it must in general refer to the jurisdiction of residence of the trust, according to its rulesas resulting at the time of the ‘attribution’ to the resident beneficiary. This, on condition that the distributed income was taxed in the hands of the trust, at the time of production, in accordance with the minimum level of taxation.

Tax residence of trust is therefore of utmost importance, also in order to verify whether or not is is to be classified as “low-tax” for Italian purposes.

Where the criterion used therein is that of the place of administration and the trust is deemed to be resident for tax purposes in the country where the trustee is resident for tax purposes, in the presence of two co-trustees, one of whom is resident in a EU State and the other established in a low-tax country, the tax-residence of the Trust will be in the State where the trust is actually taxed.

Similar considerations must be made where the criterion used is that of the main object. This criterion is closely linked to the type of trust. If the object of the trust is real estate located entirely in Italy, the identification of residence is easy; if, on the other hand, the real estate is in many countries, reference must be made to the prevalence criterion.

In the case of movable or mixed assets, the object must be identified with the actual and concrete activity exercised, the residence of the trustee or of the beneficiaries being irrelevant for this purpose.

It has been specified that, in the event that the trust is not considered to be resident for tax purposes in a State, according to the laws of that State, notwithstanding the fact that the trust administration activity is prevalently carried out there, the trust must nevertheless be considered to be “established” in that country (e.g., trusts “resident but not domiciled”) if the income produced by the trust is not subject in that country to any taxation either on the part of the trust or on the part of any beneficiaries resident in Italy.

The Circular letter is pretty accurate in clarifying the concept of Capital (“patrimonio”) and of Income (“reddito”),  within the context of Italian tax rules. Such clarification must, indeed, be welcomed as it reduces misunderstandings. In facts, for the purposes of determining the capital income to be taxed in the hands of the beneficiary (even if not ‘identified’), there is a relative legal presumption with the aim of ensuring the taxation of income even if the beneficiary of the ‘attribution’ does not receive from the trustee elements suitable to identify the taxable portion as capital income of the attribution received.

Therefore, the entire amount received constitutes capital income for the Italian resident beneficiary if it is not evident from the trustee’s accounting and non-accounting records (e.g., purely by way of example, bank or financial statements, etc.) that a distinction has been made between ‘capital’ and ‘income’.

For this purpose, the trustee must keep analytical accounts distinguishing the portion referring to the value of the trust assets (‘capital’) at the time of the initial contribution from the portion referring to the ‘income’ realised from year to year. The above must be accounted according to Italian fiscal rules.

Many other guidelines are usefully commented, making the trust taxation in Italy more clear, following the Administration interpretation. Issues like commercial trusts and non commercial trusts,  interposition and taxation for Italian tax resident beneficiaries of (discretionary) international trusts are commented.

This might be useful concepts for people wishing to relocate to Italy or living in the “Bel Paese”.


  1. Indirect Taxation

The Italian Tax Authorities definitively confirm the overcome of the so-called “entry-taxation” positions, according to which the Italian Inheritance and Gift taxes (hereinafter “IHT”) was due at the time of the asset transfer to the Trust Fund. By acknowledging the position of the Italian Supreme Court in the last years, as already commented in our previous alerts, the Italian Tax Authorities states the principle that the transfer made by the Settlor to the Trust is not relevant for IHT in so far as a stable and effective enrichment of the beneficiary occurs. In other word, IHT shall apply now when transferring the trusts’ assets to the beneficiary (final attribution) only. But not always!

The transfer of assets by the Settlor to the Trust is only subject to €200 Registration tax in only due, plus €50 cadastral and mortgage tax each in case of real estate disposal.

As already stated in the Draft of August 2021, Circular Letter no.34 clarifies that the IHT would be levied on the asset’s value as at the time of the final attribution to the beneficiary. Moreover, the Italian Tax Authorities confirm that the territoriality criteria for the application of IHT should be addressed at the moment the asset are transferred by the Settlor to the Trust.

The Circular extends, as an important novelty, the above regime to transfers made in favour of trusts with guarantee or liquidation functions. More in detail, no IHT is levied on the transfer of assets to the Trust nor on the attribution to the creditors.

A further main novelty concerns the tax treatment for those who have already paid IHT by the previous positions of the Italian Tax Authorities (according to which IHT was due on the asset transfer to the Trust). In such a case, no further IHT is due if all the following requirements are met:

  • the asset transferred to the beneficiary are the same as those initially transferred to the Trust Fund, and
  • the beneficiaries are identical to those initially provided in the Trust deed.

On the contrary, the IHT already paid will be deducted from those due to the final transfer. Alternatively, the taxpayer may file for a refund when specific requirements are met. A new concept entered therefore in the Tax Guidelines with this Circular which certainly will give more room to trust and succession plan for family business and entrepreneurs. Further, Italy may well be regarded as a secure place where to put real estate assets, wisely arbitrating the applicable (foreign) law and the (favourable) taxation.


  1. Tax Monitoring obligation for Italian tax residents

Italian Tax Authorities also gave their views on the interaction between the Italian Tax Monitoring obligations and trusts in the light of Legislative Decree No.90/2017 (implementing IV AML EU Directive 2015/849).

The Circular admitted that by an interpretative “solution”, such rules apply to an individual who qualifies as “beneficial owners” of the asset held in the Trust Fund. The Italian Tax Authorities state that provisions adopted under Common Reporting Standard should also be taken into account for identifying beneficial owners.

Regarding trust residents in Italy for tax purposes, the Trust must comply with Italian tax monitoring obligations to the extent no other beneficial owners are obliged to. On this regard, the beneficiary is regarded as a beneficial owner when he is vested or can be easily identifiable.

No tax monitoring obligations arise upon second-degree beneficiaries (i.e., nephews of the settlor when first beneficiaries are the issues) as far as they cannot claim, not even potentially, any distribution from the Trust. Similarly, Italian Tax Authorities confirm the view that trustees, trust officers and protectors are not obliged to Tax monitoring as far as the Trust gives them no right to the Trust Fund.

Finally, Italian Tax Authorities address several cases involving Italian resident beneficiaries of opaque foreign trusts. More in detail, in the case of a non-discretionary Trust, Italian resident beneficiaries must comply with tax monitoring obligations with an indication of the value of the foreign assets and investments held in their names and the percentage of the assets to which they are entitled.

In the case of a discretionary Trust, no tax monitoring obligations arise upon the beneficiaries whether the trustee does not notify even the intention to distribute the income and/or capital of the Trust Fund.


  1. Wealth Taxes for Financial and Real Estate held abroad

The Circular confirms what is already stated in the Draft, taking the opportunity to clarify the functioning of the “Property Tax on Real Estate Held Abroad – IVIE) and on “Net Wealth Tax on Financial Assets Held Abroad – IVAFE). It is recalled, on this regard, that resident individual, non-commercial companies (i.e., società semplice) and entities (i.e., trusts) are obliged to pay IVIE and IVAFE for assets held abroad. As the only novelty compared to the Draft, the Circular Letter now clarifies that Italian resident beneficiaries of a foreign opaque Trust are not subject to IVIE and IVAFE to the extent they don’t hold a legal right on the foreign real estate and financial assets.


The Circular, after a first analysis, thus seems to open the door to an increasingly widespread use of the trust among the various wealth planning tools, both for foreign investor to Italy, Italian or International Business Families and private clients. Including a specific view for private clients and families willing to take benefits from the Italian Flat Tax Rate for New Tax Residents in Italy.

Our Firm is at the forefront on the subject and will not miss in the next days to follow in-depth analysis and talks on the most relevant news, guaranteeing clients and their advisors the usual professional assistance from one of our offices.


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We are organized as one Firm working within specific jurisdictions which makes us a natural choice for cross-border advisory matters, where we combine our client advisory expertise with our professional qualifications as avvocati, solicitors, barristers, tax attorneys, commercialisti, chartered accountants and wealth planners.

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Our Advisory Hubs and “Desk ITALIA”

We have created a specific “Desk Italia” team for each office who work on cross border matters in order to deliver a prime professional service in London, Lugano and Singapore, with the strong support of our colleagues in Italy (Milan, Rome and Verona).

We work with:

  • International Banks and Wealth Managers
  • International Law Firms and CPAs
  • Family Offices
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  • Private Equity Private Investors and Club-Deal Investors
  • A network of professionals in Italy

From each office, a “Desk Italia” team can provide a wide range of high-qualified professional services aimed at dealing with any Italy related issue.

More in detail, Desk Italia provides professional services in the following areas of expertise:

  • Immigration & Relocation
  • Trust & Estate Planning
  • Reale Estate & Trophy Assets
  • Inbound investments
  • M&A Structuring
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Edited by “Desk Italia” Team.


  • Luigi Belluzzo
  • Paola Bergamin
  • Valerio Vallefuoco
  • Giovanna Mazza
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