The Circular Letter no. 34/2022 of the Italian Tax Authorities on the taxation of Trusts examines some types and specific situations, among which we highlight, below, the instructions for those who have liquidated and paid taxes according to the previous administrative practice as well as the obligations related to tax monitoring.
If taxes have been liquidated and paid at the time of the establishment or transfer of assets or rights to the Trust according to the previous practice, the payments can be considered definitively as the tax settlement, without the need to make further liquidations upon of subsequent attributions in favor of the beneficiary. The necessary condition is that these are “exhausted relationships”, meaning by these the attributions that the same beneficiaries have as well as the same assets and rights on the basis of which the liquidation and payment of the relative taxes was made at the time of the establishment of the Trust or endowment of goods or rights to the same.
In this regard we speak of “exhaustion” of the tax situation for which it is not possible to reimburse the taxes already paid at the time of the (initial or subsequent) contribution of the assets or rights to the Trust, even where the tax base calculated at the time of the subsequent attributions to the beneficiaries were to be lower than that subject to initial taxation (for example due to the different operation of the pro-tempore deductibles in force), except in the case of the presentation of the reimbursement request within three years from the payment date.
In the case of a different beneficiary or assets or rights other than those conferred and taxed, there would not be a case of “exhausted relationship” with the consequent possibility of considering the taxes already paid at the time of the contribution to the Trust, as an advance to be deducted from any tax due at the time of the future assignment.
Where there is no phenomenon of “exhausted relationship” or there is a waiver by the taxpayer of the effects deriving from the expiry of the relationship, the same can present a request for reimbursement within the terms established by article 60 of Legislative Decree no. 346 of 1990 and therefore within three years of payment, under penalty of forfeiture.
Concerning tax monitoring, it should be remembered that the obligation concerns, pursuant to the anti-money laundering legislation, all subjects who are beneficial owners.
In cases where the foreign assets are held in the name of the Trust, the declaration obligation also concerns the natural persons to whom such assets are attributable, as beneficial owners of the assets themselves.
The Trust directly fulfill any obligation if the assets and financial investments are not attributable to resident beneficial owners.
It should be remembered that in the case of a Trust, the Settlor, the Trustee, the Beneficiaries and the Guardian, if identified, must be considered beneficial owners.
Considering again tax monitoring, the obligations concern only the beneficial owners of the Trust who are holders of the right to claim from the Trustee the assignment of the income or assets of the Trust. For the purposes of regulating tax monitoring, there must be a legal (registration) or de facto (possession or holding) relationship between the subject and the foreign assets subject to declaration and who are therefore required to fulfill the monitoring obligations that are not only the owners of the assets held abroad, but also those who have the availability or the possibility of dealing it.
However, the existence of an autonomous monitoring obligation must be considered excluded if the subject can exercise, in relation to the assets held abroad, a mere disposition power in execution of a mandate on behalf of the holder. In this sense, the holders of management and administrative functions and, by analogy, the Trustee, the Settlor and the Guardian must be considered excluded from this obligation, especially in cases where the obligation to file the RW part of Italian tax return already exists for the Trust or the Beneficial Owners.
Starting from the 2020 tax period, IVIE (tax on the value of properties held abroad) and IVAFE (taxes on the value of financial assets held abroad) are taxable subjects, in addition to natural persons, also non-commercial entities and Civil law partnerships (and equivalent subjects) residing in Italy and therefore also Trusts.