ITALY Law and Practice Contributed by: Paolo Ludovici and Andrea Mirabella, Gatti, Pavesi, Bianchi, Ludovici
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. 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
• a “liquidating trust”, established to carry out the liquidation of the assets of the settlor. Foundations Italian foundations are generally used for social pur - poses only and are strictly regulated by the public authorities. A foundation can be regarded as an efficient way to preserve important cultural and artistic heritage (eg, it can be used to set up a family museum). A foundation is a legal entity whose main purpose is to assist a social, cultural or charitable need, and thus, the assets of the foundation have to assigned for the specific goal for which it was incorporated. For tax purposes, foundations may qualify as either commercial or non-commercial entities and are gener - ally subject to corporate income tax, unless they meet the requirements applicable to Third Sector Organisa - tions, in which case they may benefit from the relevant tax incentives (see 10. Charitable Planning ). 3.2 Recognition of Trusts Trusts have no specific civil law discipline in Italy and are recognised under the Hague Convention. As there is no domestic legislation relating to trusts, they can only be established in Italy in accordance with the Hague Convention and subject to a foreign governing law. The Italian Supreme Court of Cassation (No 9637 of 19 April 2018) has confirmed that trusts are not atypical arrangements and are recognised in the Italian legal system following the ratification of the Hague Con - vention. 3.3 Taxation of Trusts, Foundations and Similar Entities Located in Other Jurisdictions 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.
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