The legal instrument of the trust acquired full legal effect in Italy following the ratification of the Aja Convention on trusts by Law No. 364 of 16 October 1989, which entered into force on 1 January 1992. Article 2, para. 1 of the Convention defines a trust as “the legal relationship created, inter vivos or on death, by a person, the settlor, when assets have been placed under the control of a trustee for the benefit of a beneficiary or for a specified purpose.”
However, much of the domestic regulatory framework has been developed by the Italian Revenue Agency through circulars and tax rulings. This analysis focuses on Tax Ruling No. 239 of 2025, in which the Agency provides a clarification on the qualification of an American law trust with beneficiaries residing in Italy.
The specific case
In order to understand the content of the ruling, it is useful to briefly summarize the main elements of the application. The trust in question was established under the laws of the State of California by a settlor who simultaneously held the roles of first beneficiary and first trustee. The trust deed granted the settlor a discretionary power of amendment and revocation of the trust, exercisable up to the time of his death. Under US law, until the settlor’s death, the trust qualified as a Grantor Trust, meaning that all income, capital gains, and deductions from assets held in the revocable trust are reported on the grantor’s personal income tax returns (using Modello 1040).
According to both Italian and US tax principles, these characteristics led to the qualification of the trust as fiscally interposed.
Upon the settlor’s death, the legal nature of the trust changed, and it became a Non-Grantor Trust under US tax law. Following this event:
- the trust became irrevocable and immutable;
- the beneficiaries changed;
- a new trustee was appointed, who is also one of the final beneficiaries.
The applicants, Italian resident beneficiaries who submitted the ruling request, are entitled to 84% of the trust fund, to be equally divided upon the liquidation of the assets by the new trustee.
In this context, and to determine the applicable Italian tax regime, the applicants requested a ruling on whether the trust should be classified as opaque, transparent, or interposed for tax purposes in the period following the death of the settlor.
The Revenue Agency’s Position
The 2007 Budget Law (legge finanziaria) Law No. 296/2006 included trusts among the IRES taxpayers, amending Article 73 of the Italian Income Tax Code (TUIR) and introducing specific criteria for determining their tax residence. For the purposes of direct taxation, the TUIR distinguishes among three types of trusts:
- fiscally opaque trust, where no specific beneficiaries are identified, and income is taxed directly in the hands of the trust;
- fiscally interposed trust, which is considered non-existent for tax purposes. This applies when the trust lacks real management autonomy, serves merely as a vehicle to retain control over the assets by the settlor, the trustee acts under the instructions of the settlor or beneficiaries, and the assets are not clearly separated from the settlor’s personal assets;
- fiscally transparent trust, where identified beneficiaries are taxed directly on the income attributable to them.
In the case at hand, the Agency excluded the opaque nature of the trust. Following the settlor’s death, the beneficiaries are clearly identified and entitled to a defined percentage of both the assets and the income of the trust. The trustee retains discretion only over the timing of distributions, not over the right to receive income (an) or the amount thereof (quantum), which is predetermined.
As regards the possibility of the trust being considered interposed, the Agency noted that, following the death of the settlor:
- the trust became a non-grantor Trust;
- it became irrevocable and unmodifiable;
- although the newly appointed trustee is also a beneficiary, nonetheless the applicants demonstrated that they have no family, friendship or professional relationship with the trustee;
- the applicants do not exercise any form of interference in the trust’s administration.
These elements led the Agency to conclude that the trust cannot be regarded as interposed in relation to the applicants for Italian tax purposes. The criteria adopted in this case represent useful guidance for drafting trust deeds to correctly determine the applicable tax regime. It is likely that the Italian Revenue Agency will apply the same criteria in resolving similar interpretative doubts in future cases.
Finally, the Agency held the requirements of a transparent trust pursuant to Article 73 para. 2 of the TUIR were met. The beneficiaries are clearly identified and are considered to have current tax capacity with respect to the income. They hold an actual right to receive income and may request the trustee to pay the portion of income attributed to them. Therefore, taxation takes place in Italy in the hands of the resident beneficiaries, regardless of the location of the income.
Critical Aspects of the New Interpretation
Some legal scholars argue that the position expressed by the Italian Revenue Agency is questionable, as the necessary condition for income transparency may not be met in this case. For income to be attributable on a transparent basis, it must be immediately, originally, and unconditionally referable to the beneficiaries, allowing them to automatically and directly receive it as it accrues.
In the present case, that condition appears not to be satisfied. A letter sent by the trustee to the beneficiaries explicitly states that “the administration of the trust fund will take several months, since the settlor owned several properties and investments”. Considering this, the trust should not be qualified as transparent, but rather as opaque under Italian law, given that the trustee holds discretionary powers to accumulate income and postpone its distribution to the beneficiaries. According to the Italian Revenue Agency’s own guidance, specifically Resolution No. 425/E of 5 November 2008, the mere existence of such discretionary power is sufficient to consider the trust as fiscally opaque.
This approach is also consistent with the principle of tax fairness, as it prevents the beneficiary from having to pay taxes in advance on income which they have no actual right to receive. Nonetheless, the Revenue Agency opted for different criteria, once again highlighting the importance of conducting a thorough case-by-case legal analysis when determining the proper classification and tax treatment of a trust under Italian law.
