Landmark rulings from the Italian Revenue Agency on income tax exemption on gains from Italian shares held in trust
On 28 May 2025, the Italian Revenue Agency issued Tax Rulings No. 144 and No. 145 that the Firm obtained for one of its clients.
Both rulings concern a trust governed by English law (“Trust”) settled by an individual resident in Italy for the benefit of his wife and descendants.
Tax Ruling No. 145 rules that the Trust shall be characterised as an autonomous taxable person not disregarded vis-à-vis the settlor. The Italian Revenue acknowledged that, in light of both the Trust Deed and the features of the trustee (a Maltese company providing trust services under a licence issued by the Malta Financial Services Authority), the trustee had full discretionary powers in the management of the Trust assets without the settlor being in a position to interfere in such management.
Tax Ruling No. 144 is even more interesting as it is the first time that the Revenue Agency rules on the specific subject.
Through the ruling application, it was represented that the settlor intended to settle into the Trust his “non-substantial” shareholding in a company resident in Italy; after the settlement, the Trust might realize a capital gain from the sale of such shareholding (it should be recalled that usually the settlement of a shareholding into a trust does not trigger a taxable event over the latent gain and the tax basis upon the settlor is rolled over to the trustee). The question posed to the tax authorities was whether such capital gain could benefit from the exemption regime provided by Article 5(5) of Legislative Decree No. 461 of 1997.
The Italian Revenue, after having pointed out that the exemption regime applies to capital gains deriving from the sale of “non-substantial” shareholdings realized by persons who qualify as resident for income tax purposes in a jurisdiction listed in a Government’s white-list of jurisdictions which exchange information with Italy, confirmed the possibility for the Trust to benefit from the exemption. Upon the settlement of the Trust, the trustee made an option under Maltese tax law for the Trust to be subject to Maltese corporation tax as if it were a company resident in Malta which is a country included in the white-list. Hence, the Trust had to be considered as a person resident in Malta for income tax purposes, regardless of the fact that the capital gain could benefit from the Maltese participation exemption regime envisaged for the transfer of corporate shareholdings.
