ITALY Law and Practice Contributed by: Paolo Ludovici and Andrea Mirabella, Gatti, Pavesi, Bianchi, Ludovici
Trustees The trustee is not subject to taxation for income gen - erated by the trust. Inheritance and Gift Tax Inheritance and gift taxes are due from the trust bene - ficiaries if the settlor was an Italian resident at the time of the attribution of the asset to the trust – regardless of its location – or if the asset is located in Italy if the settlor was not an Italian resident at the time of the attribution to the trust (see 1.1 Tax Regimes ). Trustees Trustees are not subject to Italian inheritance and gift tax in relation to assets settled into a trust. 3.4 Exercising Control Over Irrevocable Planning Vehicles The settlor’s retention of control over the assets placed into a trust as well as his/her influence over the trustee’s actions can have adverse tax implications and, often, these factors have been used by Italian courts to disregard the effects of the trust for civil law purposes. However, there are tools and strategies designed to ensure the implementation of the settlor’s wishes. These include: • appointment of a protector or a protectors’ com - mittee; • letter of wishes; and • setting up a family private trust company. However, any mechanism of oversight over the trus - tee’s conduct must be carefully considered, as it may give rise to adverse consequences both from a legal and tax perspective (for example, the risk of tax inter - position of the trust).
system following the ratification of the Hague Con - vention. 3.3 Tax Considerations: Fiduciary or Beneficiary Designation Income Taxation The tax implications for beneficiaries tax resident in Italy depend substantially on whether the trust is “opaque” or “transparent” (see 1.1 Tax Regimes ) and whether the trust is tax resident in Italy or not. Italian resident opaque trusts Income of an Italian resident opaque trust is taxed in the hands of the trust (subject to CIT), and future income distributions are not taxable in the hands of the beneficiaries. Non-Italian resident opaque trusts The taxation on Italian resident beneficiaries of income distributions to them from non-resident trusts depends on whether the trust is established in a low- tax jurisdiction. If the opaque trust is established in a state or terri - tory which, with respect to income produced there, is subject to taxation of less than half of that applica - ble in Italy, attributions of income by the trust to the beneficiary are subject to taxation in the hands of the beneficiary on a cash basis. Distributions from “white list trusts” are not subject to income taxation for Italian resident beneficiaries. Such provisions apply also to trust-like entities, ie, entities having the same characteristics as a trust (such as certain foundations). Italian resident transparent trusts Income of transparent trusts is imputed by transpar - ency to the beneficiaries regardless of the actual dis - tribution. The subsequent distribution, even if it occurs in a later year, does not result in further taxation for the beneficiaries. Non-Italian resident transparent trusts Income imputed to the Italian resident beneficiary is taxable in Italy in the hands of the beneficiary regard - less of whether the income is generated in Italy or not.
4. Family Business Planning 4.1 Asset Protection
The choice of estate planning method depends on factors such as the composition of the family’s assets (movable, real estate, and family business), the com - position of the family, the number of generations
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