Italian Trusts – changes to the taxation regime 

March 2025 /

• Estate Planning
• International

Key points: 

• Principle: in Italy the transfer of assets from a trust is subject to gift or, if applicable, inheritance tax at the time of the final distribution to the beneficiary (the event triggering the taxation). No tax is due when assets are contributed to a trust, except in the case of real estate, which is subject to a fixed transfer duty. 

• The reform, effective from January 1, 2025, introduces the possibility to opt for the payement of gift or inheritance tax at the time of transferring assets into the trust, in order to anticipate potential increases in tax rates. 

Applicable Regime 

Since 2018, the Italian Court of Cassation has developed and consolidated the view that the taxable event when assets are transferred to a trust is the transfer of assets to the beneficiaries, rather than the transfer to the trust itself. The transfer of assets to the beneficiaries is considered the effective transfer of wealth to the beneficiaries of the trust, and therefore triggers inheritance or, where applicable, gift tax. The contribution of assets to the trust is a functional aspect of the trust, after which the assets are managed by the trustee and no longer belong to the settlor’s estate. 

The administrative doctrine has aligned with this interpretation and adopted Circular No. 34/E of 2022, providing administrative guidelines on the taxation of trusts. 

Optional Regime Effective from January 1, 2025 

The reform of the legislative framework, which began in 2024 with the aim of rationalizing the imposta sulle successioni e donazioni (ISD – inheritance and gift tax), was adopted on August 7, 2024, and introduces specific provisions regarding trusts, effective from January 1, 2025. 

The ISD reform allows, from January 1, 2025, for the payment of ISD at the time of transferring assets into the trust, even though the taxable event occurs when the assets are transferred to the beneficiaries. This represents a prepayment of the tax, allowing the tax rate to be fixed. The taxable base is the value of the assets at the time of transfer. When the assets are subsequently transferred to the beneficiaries, no further ISD will be due. Moreover, if the transfers do not occur, it will not be possible to recover the pre-paid tax. 

It is anticipated that these new provisions can be applied to trusts already established. 

The ISD is due on all assets transferred to the beneficiary if the settlor of the trust is a resident in Italy at the time of the contribution. 

We remain at your disposal if you wish to discuss this topic further or if you are considering establishing a trust in Italy.