Those who plan to move to Italy after the new regime is in place should consider other planning strategies, such as specifically designed trusts aimed at minimizing their income taxes there, even when they operate outside the special regime itself ..read more

On October 9, 2023, the last Ministerial Decree required for the final implementation of Italy’s Register of Trusts was published, and the Register of Trusts is now in effect. The initial filing deadline is December 11, 2023. The filing in the Register is required for domestic trusts, private foundations, and similar legal arrangements, defined as trusts established or resident in Italy and foreign trusts with Italian source income. The place of establishment or residence of the trust and the source of the trust’s income are the key tests applied to determine whether a trust is subject to repo ..read more

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The ruling concerns a rather straightforward case and does not clarify certain more challenging issues that may arise in certain situations where the terms of the trust agreement provide for more flexible criteria or standards pursuant to which the trust beneficiaries may receive distributions from the trust or a foreign country’s taxation of the income of the trust may change depending on the classification of the trust or the tax treatment of the distributions in that country. However, the ruling is useful in offering an overview of the opportunities and potential traps involved in the tax p ..read more

With its Ruling n. 237 of March 2, 2023 ( ), the Italian Tax Agency ruled that when the trustee of a foreign trust is required to make an annual distribution to the beneficiaries of the trust of cash or other property of the trust that represent a predetermined percentage of the fair market value of the trust calculated at a fixed date, that trust must be considered fiscally transparent, and the beneficiaries are taxed in Italy on the income of the trust which is proportional to their interests in the trust, as specified in the trust agreement, on a fiscally transparent basis and regardless of ..read more

It’s important to note that the ruling on the third issue is questionable and may be affected by how carefully the taxpayer presented her case. Under Italian tax law, a trust is partially fiscally transparent and partially fiscally opaque when the trust agreement does not provide that a beneficiary has the right to the distribution of the trust income as such, but instead provides that a certain percentage of the value of the trust must be distributed to the beneficiary. In that case, the trust is fiscally transparent regarding a portion of the trust income not exceeding the share of the trust ..read more

In light of this ruling, taxpayers should reevaluate their trust planning structures and ensure that the combination of provisions governing the powers of trustees, trust advisors, trust protectors, guardians, and other individuals or entities involved in the administration of the trust, distribution of trust principal and income, and changes to or termination of the trust, are appropriately drafted and coordinated to avoid the risk of the Settlor ultimately being considered the dominus of the trust, causing the trust to fail in achieving its objectives. ), the Italian Tax Agency addressed a c ..read more

Finally, Circular 34 deals with the case of secondary beneficiaries or “subsequent interest holders” with respect to whom it clarifies the following: “With reference to ‘subsequent interest holders’, i.e., those who would become beneficiaries only when the first beneficiaries cease to exist, taking over from the latter, it is believed that they cannot be classified as ‘beneficial owners’ for the purposes of tax monitoring, provided that there are no statutory provisions or other clauses in the instruments of the trust such that they may be recipients of income or patrimonial attributions despi ..read more

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In its Ruling n.83 of February 14, 2022, the Italian Tax Agency confirmed that Italy’s substituted tax regime (so-called flat tax, or forfeit) for high net worth individuals applies in a case in which international executives or managers of multinational companies perform their functions partly in Italy and partly outside of Italy, where the group’s local subsidiaries or business units are located. Italy operates a special tax regime by means of which a foreign or Italian national who has not been a resident of Italy in at least nine of the previous ten tax years, can move to and establish his ..read more