On 20 October 2022 the long-awaited Circular Letter no. 34/2022 of the Italian Tax Authorities on the taxation of Trusts was issued.

Two are the macro-topics addressed: the indirect and the direct taxation of Trusts.

Regarding indirect taxation, the now well-established orientation of the law cases of legitimacy of the Court of Cassation is transposed, assimilating the Trust to all the constraints of destination so making them part of the acts attributable to inheritance and gift tax according to the principle of proportional taxation possible and deferred.

Also, for Trusts it is necessary to verify the tax assumption required by the n. 349/1990 consisting in the actual transfer of assets or rights and therefore in the real enrichment of the beneficiaries. In this sense, the deed of endowment in the Trust, by which the Settlor confers assets and/or rights transferring them to the Trustee, it is not a taxable transfer but a generally neutral act which does not give rise to proportional taxation for the purposes of gift, mortgage, and cadastral tax, not a real enrichment of the beneficiaries but an indeterminate economic benefit.

These taxes will apply only at the time of the actual final transfer to the Beneficiary (i.e., outgoing tax). The overcoming of the thesis of the advanced taxation of the Trust is sanctioned.

The trust deed (with public deed/certified private deed) is subject to the registration tax in a fixed amount.

The deed of endowment of the Trust (with a public deed/certified private deed) by the Settlor is subject to registration and hypo cadastral taxes in a fixed amount. Particular attention must be paid to the possibility of loss of tax benefits in the transition from the Settlor to the Trust (e.g., “first house” in the five-year period).

The attribution of assets to the Beneficiaries is subject to the inheritance and gift tax, at any stage of the life of the Trust, with the application of existing rates and deductibles with respect to the degree of kinship between the Settlor and the Beneficiaries. 

Underlining the relevant aspects in terms of direct taxation, we highlight the implementation of the innovations introduced by art. 44 and 45 of the TUIR (the Italian Unified Law on Income Tax) as well as by art. 13 of the Legislative Decree 124/2019 according to which:

  1. the sums or values paid by Fiscally opaque Trusts (with unidentified beneficiaries) established in States with preferential tax regimes (level of taxation lower than 50% of that applicable in Italy) are taxed on the beneficiaries resident in Italy as capital income and on a cash basis;
  2. the attributions of Foreign Trusts to beneficiaries resident in Italy, where there is doubt about the financial or income nature of the attributions themselves, must be considered income (relative legal presumption), for the entire amount attributed.