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Trusts in Italy: when to use one and how it is taxed after the reform

Trusts after Legislative Decree 139/2024: gift tax on exit, option to pay upfront, opaque and transparent trusts, beneficial ownership and section RW.

A trust is useful when assets need to be segregated from the other property of the person establishing the trust (the settlor, disponente) and entrusted to a trustee for a specific purpose, such as generational transfer or the protection of a vulnerable family member. Gift tax is, as a rule, payable when the assets reach the beneficiaries rather than when they enter the trust, but it is possible to opt to pay it upfront; income is taxed in the hands of the trust or of the beneficiaries depending on whether or not the latter are entitled to claim it.

The framework

Indirect taxes. With Circular no. 34/E of 20 October 2022, the Italian Revenue Agency (Agenzia delle entrate) adopted the now settled case law of the Court of Cassation: the deed of settlement and the deeds of endowment, executed by public deed or private deed with authenticated signatures, are subject to registration tax (imposta di registro) at a fixed amount (Article 11 of the Tariff, Part One, annexed to Presidential Decree no. 131/1986) and, for real estate, to fixed mortgage and cadastral taxes (imposte ipotecaria e catastale). Since 1 January 2025 taxation on exit has been laid down in statute: Article 4-bis of Legislative Decree no. 346/1990, inserted by Legislative Decree no. 139 of 18 September 2024, levies the tax on the transfer to the beneficiaries, with the rates and tax-free allowances (franchigie) of Articles 7 and 56 determined by reference to the relationship between settlor and beneficiary, including for trusts already in existence (paragraphs 1, 2 and 4).

Paragraph 3, as amended by Legislative Decree no. 148 of 7 August 2026, allows the settlor, or the trustee in the case of a testamentary trust, to pay gift or inheritance tax and mortgage and cadastral taxes upfront, on the basis of the values and of the relationship between settlor and beneficiary at the time of the contribution or of the opening of the succession. If the category of beneficiary cannot be determined, the highest rate applies with no allowances. Subsequent transfers to beneficiaries of the same category for which the taxes were paid in advance are no longer subject to gift tax or to mortgage and cadastral taxes, and the taxes paid are not refundable. The implementing arrangements are left to a measure of the Director of the Revenue Agency (paragraph 4). Under Article 2, paragraph 2-bis, where the settlor is resident at the time the assets are segregated, the tax applies to all assets transferred, wherever located; where the settlor is non-resident, only to assets located in Italy. The rules on “dopo di noi” trusts (trusts set up for persons with severe disabilities, Article 6, Law no. 112/2016) remain unaffected.

Direct taxes. The trust is subject to IRES (imposta sul reddito delle società, corporate income tax) (Article 73 of the Italian income tax code, TUIR). It is transparent where the income beneficiaries are identified and are entitled to claim the distribution of income: the income is attributed to them pro rata as income from capital (Article 44, paragraph 1, letter g-sexies). It is opaque where that entitlement is lacking: the trust pays IRES and, if it is not a commercial trust, its distributions are not taxed a second time; for an opaque commercial trust, the Agency treats distributions as profits (Article 44, paragraph 1, letter e), subject to 26% withholding tax for beneficiaries who are individuals (Circular 34/E, section 3.2). Distributions from trusts established in preferential tax regime countries (Article 47-bis) constitute income from capital for the resident recipient and, where income and capital cannot be distinguished, the entire amount is presumed to be income (Article 45, paragraph 4-quater). If the settlor retains control, the Agency may treat the trust as interposed (a mere nominee) and attribute income and assets to the settlor (Circular 34/E); this is assessed case by case.

Beneficial ownership and tax monitoring. The trustee must obtain and retain information on beneficial ownership: settlor, trustee, protector (guardiano), beneficiaries or classes of beneficiaries (Article 22, paragraph 5, Legislative Decree no. 231/2007). For the purposes of section RW of the tax return (quadro RW, reporting of foreign assets; Article 4, Decree-Law no. 167/1990), Circular 34/E considers all resident beneficiaries of a foreign trust to be required to complete it, even if identified only by class, with different obligations for discretionary and non-discretionary trusts (section 5.2).

From 1 January 2027 the rules on indirect taxes and on income move, with new numbering, into the consolidated code on registration tax and other indirect taxes (Legislative Decree no. 123 of 1 August 2025) and into the consolidated income tax code (Legislative Decree no. 117 of 19 June 2026); until then the provisions cited above apply.

What changes in concrete terms

A resident father contributes securities worth 1,500,000 euros to a trust; on expiry, the trustee will allocate 750,000 euros to each of his two children. On entry, only registration tax at a fixed amount is payable. On exit, each child remains below the allowance of 1,000,000 euros and pays no gift tax. If everything went to a single child, the tax would be 4% on the 500,000 euros in excess: 20,000 euros.

If the deed left the trustee free to choose the beneficiaries among relatives and third parties and the father opted to pay upfront, the category could not be determined: 8% on 1,500,000 euros, i.e. 120,000 euros, with no allowances and no refund.

For foreign trusts, the classification may change over time: in ruling (risposta a interpello) no. 239 of 15 September 2025, a United States trust that was a grantor trust under US law while the settlor was alive was held to be transparent after the settlor’s death for the Italian beneficiaries with predetermined shares; the Agency did not rule on the preceding period.

In practice

• Before the deed: settlor, notary and accountant review the powers reserved to the settlor, the beneficiaries’ rights, the residence of the trust and any “prima casa” (first-home) tax relief still within its holding period.
• On settlement and on each endowment: registration with fixed taxes; any option to pay upfront must be decided before the deed, with the notary, after checking the status of the Agency’s implementing measure.
• Every year: the trustee prepares accounts keeping capital and income separate, files the trust’s tax return, whether opaque or transparent, and provides the beneficiaries with the information needed for their income and section RW reporting.
• On each allocation, even without a deed, such as a bank transfer by the trustee: the beneficiary self-assesses the tax and files the notification required by Article 19, Presidential Decree no. 131/1986 within thirty days of the transfer (Article 4-bis, paragraph 1, Legislative Decree no. 346/1990).
• To be retained: deeds, accounts, trustee communications and evidence of taxes paid.

Mistakes to avoid

• Reserving to the settlor powers of revocation or binding instructions: the trust risks being treated as interposed, with income and assets attributed to the settlor.
• Contributing a first home purchased with the relief less than five years earlier: the relief may be forfeited (Note II-bis to Article 1 of the Tariff, Part One, annexed to Presidential Decree no. 131/1986).
• Overlooking gifts already made by the settlor to the same beneficiary, which reduce the allowance (Article 57, Legislative Decree no. 346/1990).
• Receiving distributions from a trust in a preferential tax regime country without accounts separating capital and income: the entire amount is presumed to be income.
• Omitting section RW because the beneficiary is identified “only by class”.

References

Legislative Decree no. 346 of 31 October 1990, Articles 2, paragraph 2-bis, 4-bis, 7, 56 and 57

Article 4-bis inserted by Legislative Decree no. 139 of 18 September 2024 (from 1 January 2025) and amended by Article 13 of Legislative Decree no. 148 of 7 August 2026

Presidential Decree no. 131 of 26 April 1986, Article 19, Article 1, Note II-bis, and Article 11 of the Tariff, Part One

Presidential Decree no. 917 of 22 December 1986, Articles 44, 45, 47-bis and 73

Presidential Decree no. 600 of 29 September 1973, Article 27

Decree-Law no. 167 of 28 June 1990, Article 4

Legislative Decree no. 231 of 21 November 2007, Article 22

Law no. 112 of 22 June 2016, Article 6

Legislative Decree no. 123 of 1 August 2025

Legislative Decree no. 117 of 19 June 2026

Revenue Agency Circular no. 34/E of 20 October 2022

ruling (risposta a interpello) no. 239 of 15 September 2025