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Taxation of trusts in Italy: most recent updates

by Dr Antonio Landolfi

The Italian Tax Agency Circular no. 34/2002 of the 20th of October 2022, has officially clarified a number of historically debated issues in Italy, related to both direct and indirect taxation of Trusts, at the stage of set up, as well as at the distribution of the Trust’s patrimony.

At the outset, it is must be clarified that Italy has never issued a specific Law on domestic Trusts, as it is still the case for many Civil Law countries; however, Trusts subject to foreign Laws are recognized in Italy by virtue of the 1985 Hague Convention on the Law applicable to Trusts and on their recognition.

The aforementioned Circular, which offers a substantial revision of the previous Agency’s interpretation on the issue of taxation of Trusts, comes after several interesting rulings by the Italian Court of Cassation, issued in the last decade, that have prepared the ground for this revirement.

Unfortunately, said decisions of the Italian Supreme Court have never been applied by the Tax Agency, which, contradictory, has always been firmly defending its traditional interpretation, stating, in particular, that the Italian succession duty would apply at the initial transfer of the trust assets from the settlor to the trustee.

This long lasting misalignment has been possible only because, according to Italian Civil Procedure Code, judicial precedents, even if consisting in decisions issued by the Supreme Court, are neither compulsory nor binding for judges deciding similar cases, which are therefore free to disagree with any previous judicial statement and to give their own interpretation of the rules of law to be applied to each case.

Indirect taxation

The previous Circular no.3/E/2008 of the Italian Tax Agency used to state that Law no. 262/2006 on Succession and Donation Duty, would apply to any transfer of movable and immovable assets to the trustee, either at the initial Trust Deed or simultaneously with the subsequent deeds of transfer.

In particular, the Succession and Donation Duty, in Italy, is a tax related to both donations and transfers to heirs of any kind of assets.
The tax rates to be applied vary according to the relationship between the donor (or the deceased person) and the beneficiary.

In particular, the following rates shall apply:

  • 4%, on the amount in excess of an exempted value of €1.000.000, to each heir, for spouses and lineal relatives;

  • 6% on the amount in excess of an exempted value of €100.000, to each heir, for brothers and sisters;

  • 6%, to be calculated on the total value (i.e. without exemption), for other relatives up to the fourth degree, lineal in-laws, as well as in-laws up to the third degree;

  • 8%, to be calculated on the total value (i.e. without exemption), for other heirs and beneficiaries.

Said interpretation has been now completely reversed by the latest Circular n. 34/2022.

In facts, as stated therein, the Trust Deed, by which a Settlor expresses his will to set up the trust, shall be subject to a fixed registration fee and the same taxation also applies to subsequent transfer deeds by which a Settlor provides the Trust with movable or immovable assets.

To this extent, the Agency has recognized that such are not taxable transfers since they do not imply a definitive attribution of assets in favour of the Trustee, whom is only deemed to administer the assets and keep them segregated until the final term of duration of the Trust, in view of their future distribution to the beneficiaries (as previously stated by the Court of Cassation in Sentence no. 8082/2020).

Furthermore, the Agency has also affirmed that the transfer of assets in favour of a Trustee does not in itself constitute at all a taxable transfer of wealth and it rather represents a tax neutral act not subject to indirect taxation, since there is no effective patrimonial increase in favour of the beneficiaries of the Trust (as was previously clarified by the Italian Supreme Court in both the Orders of the 30th of October 2020, no. 24153 and 24154).

Therefore, on the deeds of transfer, the registration tax will be applied in a fixed amount of a few hundred euros.

As a consequence, according to the latest indications of the Italian Tax Agency, only the deeds by which the trust assets are distributed to the beneficiaries shall be subject to the Succession and Donations Duty.

In fact, following the consolidated decisions of the Italian Supreme Court, the Agency affirms in its latest Circular that the condition for application of the Succession and Donations Duty is that an effective transfer of wealth takes place, through a stable and not merely instrumental patrimonial attribution, in favour either of heirs or of beneficiaries of donations.

Then, in the case of Trusts, a taxable transfer would occur only upon distribution of trust assets to the beneficiaries (as per Supreme Court’s Sentence no. 8082/2020).

Direct Taxation

The Italian Tax Agency, with said Circular, also clarifies some other debated issues in relation to direct taxation of Trusts in Italy.

In particular, in relation to non-resident trusts without named beneficiaries that are established in States with particularly favourable tax regimes in comparison to Italy (where the nominal level of taxation of incomes is lower than the 50% of that applicable in Italy), it is stated that sums eventually paid to any resident person, even if not expressly named as beneficiary, shall always be considered as a taxable income in Italy.

Moreover, in relation to the distributions by foreign Trusts to beneficiaries whose residence is in Italy, it has been clarified by the Agency that, in case it is not possible to distinguish between a distribution of income and of a distribution of trust assets, the entire amount received by the resident beneficiary shall be deemed as an income.

The Agency also confirms that reference shall be made to the Trustee's accounting documentation in order to state if the amount received by a beneficiary residing in Italy is to be considered as a distribution of assets rather than of incomes, for the purpose of application of Italian income tax.


According to the updated directives of the Italian Tax Agency, it is now clear that both direct and indirect taxes shall apply only if and when a distribution to beneficiaries occurs and this might presumably have a material effect on the Trust industry in Italy.

In fact, even though this lastly upturn by the Italian Tax Agency has not completely solved the various debated aspects of direct and indirect taxation of Trusts in Italy, at least, today, settlors, beneficiaries and trustees of Trusts established in Italy can relay on a favourable alignment between the interpretation of the Agency and the consolidated jurisprudence of the Supreme Court of Cassation.

Eventually, it is now possible to foresee, for the next future, a substantial decrease of the number of disputes instigated by the Italian Tax Agency in relation to Trusts established in Italy, on the matter of taxation of the same, and, as a consequence, a further diffusion of both family and commercial Trusts in the country.

Photo: JFL Photography - 

12 April 2023

Dr Antonio Landolfi

Landolfi & Associati, Managing Partner

Landolfi & Associati