Trusts in Italy: A Legal, Tax, and Conflict of Laws Framework

|:---| | Spouse or direct descendant/ascendant | 4% | €1,000,000 | | Sibling | 6% | €100,000 | | Other relative (within 4th degree) | 6% | None | | Unrelated party | 8% | None |

If the kinship evidence is incomplete or ambiguous — a common problem with discretionary trusts where beneficiaries are identified by class rather than name — the Agenzia delle Entrate may apply the highest rate on the basis that the relationship has not been proven.

Operational Case Considerations

The "Low-Tax" Catch

Consider a trust established in a low-tax or non-cooperative jurisdiction. Under the 2026 rules, any distribution made from such a trust to a resident of Italy is frequently taxed at the recipient's maximum progressive tax rate (IRPEF), which can reach 43%. This represents a significant increase over the 26% flat tax often anticipated for capital gains. Without a prior audit of the trust's home jurisdiction tax status relative to Italian blacklists, relocation to Italy can result in unforeseen and substantial fiscal liabilities.

The UBO Register Compliance

Italy mandates that all trusts with legal or fiscal effects within the jurisdiction must disclose their Ultimate Beneficial Owners (UBOs) in the dedicated section of the Companies Register. Failure to maintain an accurate and current UBO registration is a binary compliance failure that can result in the administrative freezing of Italian banking assets or the forestalling of property transactions involving the trust.

The Article 15 Clawback

A UK-domiciled settlor creates a Jersey-law discretionary trust, transferring an Italian villa and €2m in Italian bank deposits. The settlor has three children. The trust deed gives the trustee absolute discretion to distribute to any of the children or their issue. One child is excluded from all distributions.

The excluded child invokes Article 15(1)(c) of the Hague Convention. The Italian court applies the mandatory share rules: as one of three children, the excluded child is entitled to a minimum of 1/9 of the estate (the reserved quota for children when there is a surviving spouse) or a higher share depending on the family structure. The trust's governing law (Jersey law, which does not recognise forced heirship) gives way. The Italian legittima prevails.

The Cohabiting Couple Trap

A UK couple — unmarried — purchase an Italian apartment. The property is registered solely in one partner's name due to mortgage requirements. Both partners contribute to the purchase price and mortgage payments. The relationship breaks down.

In England, the contributing partner would have a strong claim to a beneficial interest under a constructive or resulting trust (Stack v Dowden [2007]). In Italy, the lex situs governs whether a trust arises. Since Italian law does not recognise implied trusts, the contributing partner has no proprietary claim to the Italian property. Their only potential remedy is a personal claim for unjust enrichment (indebito arricchimento) under Article 2041 of the Italian Civil Code — a far weaker and less certain remedy.

Professional Legal Considerations

Settlors and their advisors should secure a comprehensive audit of the foreign trust deed addressing both the fiscal classification and the conflict of laws dimensions. The audit should determine:

Governing law compliance: Is the choice of governing law clearly stated? If not, which law has the "closest connection"?
Mandatory rules exposure: Do the trust assets include Italian-situated property? If so, Articles 15(1)(c) (forced heirship), 15(1)(d) (property formalities), and 15(1)(b) (matrimonial property) may override the trust's governing law.
Fiscal classification: Will the Agenzia delle Entrate classify the trust as opaque or transparent? What is the effective tax rate on distributions?
Recognition risk for implied trusts: If the trust relies on informal arrangements or constructive trust principles, is it "evidenced in writing" within the meaning of Art. 3 of the Convention? If not, its recognition in Italy is not guaranteed.
Trustee independence: Does the trustee exercise genuine, independent discretion? Or does the settlor retain "Powers of Direction" that may compromise the trust's status as a genuine disposal?

Proper administration involves ensuring that the trust maintains a sufficient degree of "Trustee Independence" to sustain an opaque status where fiscally desirable, while simultaneously ensuring that the trust deed is sufficiently detailed and documented to fall within the Convention's "evidenced in writing" requirement. Strategic management focuses on the coordination of kinship evidence required for the 2026 Exit-Tax model. Where a relocation to Italy is planned, considerations should include the "Decanting" or restructuring of the trust to satisfy the Italian tax office's standards regarding the effective disposal of assets. Coordination between the trust's reporting and the settlor's mandatory Quadro RW filing is a primary requirement for maintaining long-term transparency and avoiding administrative penalties.

Ask the Tax Desk about your Trust

Additional Notes for Professionals

The conflict of laws framework for trusts is stated in Rules 180–184 of Dicey, Morris & Collins on the Conflict of Laws (15th Edition), Chapter 29. The mandatory rules override is Article 15 of the Hague Convention on Trusts (1985), implemented in Italy through Law 364/1989. The Italian PIL provisions are in Articles 16 (ordine pubblico), 17 (mandatory rules), and 51 (lex situs) of Law 218/1995. The meritevolezza test derives from Article 1322 of the Italian Civil Code. Simplified enforcement against trust assets is governed by Art. 2929-bis CC; the revocatory action by Art. 2901 CC. The Cassazione Sezioni Unite confirmed that trust taxation arises at distribution, not creation. The 2026 fiscal framework is established in Article 4-bis of Legislative Decree 346/1990, as interpreted by Agenzia delle Entrate Circular 34/E of 2022.

[!TIP] Authoritative Links: For more on the mandatory share rules that override trust provisions, see our note on Forced Heirship in Italy 2026. For the wealth taxes on trust assets, see IVIE and IVAFE in Italy 2026 or the HNWI Flat Tax Regime 2026. For the classification of trust assets as movable or immovable, see Movable or Immovable? The Hidden Classification.