Edited by Fabrizio Vedana

The Revenue Agency, with a circular released for public consultation in August, shifted the taxation of trust contributions to the time they are assigned to the beneficiaries.

The new provisions increase the attractiveness of trusts as a wealth management tool. As a result of the measure, parents and, more generally, holders of financial, real estate, or other assets will be able to transfer property to one or more beneficiaries, whether family members or not, without paying any gift tax. Taxes, if applicable, will be paid by the beneficiaries when they receive the assets from the trust.

The trust, a tool that, partly as a result of these new regulations, is poised to become even more widely used to manage complex situations. Italy, like most European countries, will see tens of thousands of families involved in generational transitions in the coming years; these are the so-called baby boomers who are passing the baton to their children or grandchildren. With this measure, the tax authorities appear to want to incentivize the planning and implementation of these wealth transfers.

The Revenue Agency, acknowledging the case law now consisting of more than one hundred decisions by the Court of Cassation, is changing its interpretative approach, opting for the "outgoing taxation" mechanism rather than the previous "incoming taxation" mechanism.

Under the new provisions, the patrimonial attributions that affect the life of a trust are relevant, for the purposes of inheritance and gift tax and mortgage and land registry taxes, only when the assets encumbered by the trust are definitively attributed by the trustee to the beneficiaries, because only at that moment does the stable patrimonial enrichment that justifies the taxation take place.

The tax authorities have not addressed (and could not have addressed) the thorny issue of how to identify the beneficial owners of the trust for anti-money laundering purposes. However, regarding tax monitoring obligations (completing the RW section of the tax return), they have introduced a principle that could reasonably also be applied for anti-money laundering purposes: that the trustee is responsible for identifying the beneficial owners of the investments and assets held abroad by the trust.

All that remains is to wait for the aforementioned circular to be issued, along with any applicable clarifications from the Bank of Italy regarding anti-money laundering aspects.