Trusts under Italian Tax Law: Structure and Taxation
1. 📘 Introduction to Trusts in Italy
Although Italy does not have a domestic law governing trusts within its Civil Code, it recognizes trusts through its ratification of the Hague Convention on the Law Applicable to Trusts and on their Recognition (ratified with Law No. 364/1989). As a result, Italy acknowledges the legal effects of foreign trusts, allowing individuals and entities in Italy to establish and manage trusts, often using common law jurisdictions as the trust's governing law (e.g., Jersey, Guernsey, New Zealand, UK).
A trust is defined as a legal relationship in which a person, the settlor, transfers certain assets to a trustee, who is obliged to manage them in accordance with the trust deed and for the benefit of beneficiaries or a specific purpose. The trustee holds legal title to the assets, while the beneficiaries may hold either a vested or contingent interest.
In Italian practice, trusts are frequently used for:
Estate and succession planning
Asset protection
Tax planning and family business continuity
Philanthropy or special needs planning
2. ⚖️ Types of Trusts under Italian Tax Law
From a fiscal standpoint, the Italian Revenue Agency (Agenzia delle Entrate) classifies trusts based on the identifiability of beneficiaries and the distribution of income. This classification determines how income is taxed and who is liable for tax.
2.1. Trust Trasparente (Transparent Trust)
A trust is considered "trasparente" when:
Beneficiaries are clearly identified (nominative and determinable)
The trust deed allows income to be directly attributed to these beneficiaries
🔹 Tax Treatment:
The trust does not pay income tax on the income it earns.
Instead, income is fiscally imputed to the beneficiaries, even if not actually distributed.
Beneficiaries are taxed personally under the progressive IRPEF (personal income tax) system.
The allocation is proportional to their share in the trust, as defined in the trust deed.
🔹 Key Points:
Useful for estate planning when beneficiaries are already known and the settlor wishes to pass income directly for tax efficiency.
Beneficiaries might be in lower tax brackets, making this an effective income-splitting tool.
Requires transparency and clarity in the trust documentation.
2.2. Trust Opaco (Opaque Trust)
A trust is classified as "opaco" when:
Beneficiaries are not identified, or
Income is not automatically attributed to the beneficiaries
🔸 Tax Treatment:
The trust is considered an autonomous tax subject and is taxed at the corporate income tax rate (IRES), currently 24%.
The income remains within the trust until it is actually distributed to beneficiaries, at which point separate taxation may apply depending on the nature of the distribution (capital vs. income).
Beneficiaries do not pay tax unless they receive actual distributions.
🔸 Key Points:
Offers greater flexibility and privacy, especially where beneficiaries are uncertain or intended to change.
Allows the trustee to accumulate income and defer distributions.
Useful for asset protection and family wealth structuring.
2.3. Trust Misto (Mixed Trust)
Some trusts may exhibit characteristics of both transparent and opaque trusts. These are referred to as “trust misto”.
In such cases, a portion of the trust’s income may be taxed to identified beneficiaries, while the rest is retained and taxed to the trust itself.
The mixed classification is more complex and often requires individual ruling requests to the tax authority for clarity.
3. 💸 Taxation Beyond Income – Transfer Taxes
3.1. Imposta sulle Successioni e Donazioni (Inheritance and Gift Tax)
One of the most debated areas in Italian tax law is the application of the inheritance and gift tax to trusts.
🟡 Revenue Agency’s Position:
The Agenzia delle Entrate has stated that the gift or inheritance tax applies at the time the trust is set up and assets are transferred to the trustee. This interpretation treats the transfer to the trust as equivalent to a donation.
Tax rates vary depending on the relationship between the settlor and the final beneficiaries:
4% (spouses and children) – with €1 million exemption per heir
6% (siblings and other close relatives) – with €100,000 exemption
8% (others or non-relatives) – no exemption
⚖️ Case Law:
However, Italian case law (e.g., Supreme Court decisions) has, in some instances, disagreed with the Revenue Agency, arguing that:
The tax should apply only when assets are actually transferred to the beneficiaries (i.e., not when assets are put into the trust).
The trust is a temporary vehicle and does not equate to a final transfer of wealth.
🛑 Conclusion: This remains an open legal question, and caution must be exercised in trust structuring to minimize litigation risk.
3.2. Indirect Taxes
When transferring real estate or certain assets to a trust, registration tax, mortgage tax, and cadastral tax may apply. These vary depending on the nature of the assets and whether the trust is commercial or private in nature.
4. 🌍 Cross-Border Trusts and CFC Rules
If a trust is set up in a foreign jurisdiction, additional complexities arise:
Italy applies Controlled Foreign Company (CFC) rules where an Italian resident has control over a foreign trust located in a low-tax jurisdiction.
In such cases, the trust’s income may be attributed to the Italian resident, even if no distribution occurs.
Foreign trusts must be carefully assessed to avoid blacklist issues, presumption of interposition, and potential double taxation unless properly structured.
5. ✅ Conclusion: Strategic Planning with Trusts in Italy
Trusts remain a powerful but complex tool in Italian tax and estate planning. They offer flexibility, asset protection, and intergenerational wealth planning, but must be carefully structured to comply with Italian tax rules.
When deciding between a trasparente or opaco trust, key factors include:
Identifiability of beneficiaries
Timing of income taxation
Privacy and control needs
Expected income and tax rates
Succession objectives
🧠 Professional advice is essential
Given the evolving interpretations by tax authorities and courts, establishing and managing a trust in or with effects in Italy should always involve:
Legal and tax advisory support
Detailed trust deed drafting
Ongoing compliance with Italian reporting and tax obligations