Latest development on foreign trusts taxation in Italy according to the Finance act tax bill 2020. Input statement delivered in Singapore, October 18th 2019

1. International Tax Dialogue | ITD
Global Tax Standard – Current Framework
Marco Greggi
Singapore, October 18th 2019
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2. Outline of the Input Statement
• Opaque trusts made transparent under the 2020 Italian Finance Act
(so called “Collegato fiscale” ?);
• The goal of the measure;
• The law as it is;
• The possible overkill effect ?
• Some recommendations for non Italian practitioners doing business with / in the
Country / having assets there.
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3. The Overall Scenario
• Italy is experiencing a situation of Financial distress:
• Wrong polices;
• Tight condition to access the Eurozone;
• Political framework:
• Fragmentation of the political landscape;
• Weak pro-Euro majority lacking of popular consensus;
• Consequence:
• Aggressive financial bill minimising collateral effects.
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4. Draft Bill
• Article 14 “Foreign Trusts”
• Revenue attributed to Italian residents by foreign trusts (or equivalent
legal subjects resident in states and territories considered to be
privileged (aka “heaven”) according to income tax level benchmark
only (as per article 47 – bis Income Tax Act) even when the
aforementioned Italians can not be considered as beneficial owner
under article 73 Income Tax act (reported beneficial owner);
• All the wealth distribution by the foreign trust are to be considered as
income to this purpose.
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5. Draft Bill
• Article 14 “Foreign Trusts”
• Revenue attributed to Italian residents by foreign trusts (or equivalent
legal subjects resident in states and territories considered to be
privileged (aka “heaven”) according to income tax level benchmark
only (as per article 47 – bis Income Tax Act) even when the
aforementioned Italians can not be considered as beneficial owner
under article 73 Income Tax act (reported beneficial owner);
• All the wealth distribution by the foreign trust are to be considered as
income to this purpose.
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6. Condition 1: Back to Black ?
• Countries whitelisted:
1. EU States;
2. EEA States;
3. States with whom Italy has a Treaty granting an adequate exchange of
information;
4. States whose average tax level is no less than 50% of the Italian one in the
equivalent conditions;
• Possibility to demonstrate that the actual goal is not a tax deferral
(ruling procedure).
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7. Condition 2: Beneficial, actually !
• Italian Tax police is granted powers (equivalent to those granted to
tackle money laundering schemes and criminal operations):
• To identify the actual beneficial in case of Opaque / Discretionary Trusts;
• To audit the resident beneficial of the trust, although not transparent
• How ?
• Possibly using a “substance over form approach”;
• Checking the behaviour of the trustee through years;
• Retroactive application ?
• Most likely yes (as for the identification of the beneficial owner).
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8. Condition 3: Income or wealth ?
• Uncertainty in the identification of the nature of wealth distributed:
• Is it a revenue of the Trust ?
• Is the Trust just distributing par of its capital ?
• In case of uncertainty, anything s considered as income for tax
purposes (in Italy) and taxes as capital income in the hands of the
recipient.
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9. Concluding Remarks
• Steps to be considered by the Trustee / Advisors;
• In the short run:
• Monitor the development of the decree;
• Check the consistency of the structure enacted with this scenario;
• Check the act of incorporation / settling of the Trust and its consistency;
• In the long run:
• Consistency with EU law
• Consistency with DTC (“other kind of income”) ?
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10. Thanks you for your Attention
marco.greggi@unife.it
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https://www.education-in-taxation.li/