Italian Revenue Agency: Transfer of Assets into a Trust is not subject to Proportional Tax

Circular 34/E of the Italian Revenue Agency, issued on October 20, 2022, provided important clarifications on the taxation of trusts, acknowledging, among other things, that the transfer of assets to the trustee is not subject to immediate proportional tax.

With this, the Agency has definitively aligned itself with the position of the Court of Cassation, disregarding its earlier determinations.

The Circular, however, in stating that the tax is deferred until the assets exit the trustee’s estate and enter that of the beneficiary, specifies that if the beneficiaries are identifiable and have fully enforceable rights from the establishment of the trust, proportional taxation can occur at the time the trust is funded.

The complex set of guidelines expressed in the Circular outlines a comprehensive framework for the taxation of trusts in Italy, highlighting the importance of proper planning and management to ensure the trusts’ compliance with the tax regulations.