Testamentary trusts and taxes: clarifications from the Revenue Agency

A testamentary trust is a useful tool for managing assets after the death of the settlor. But what are the taxes to be applied when assets are transferred to the trust? The Italian Revenue Agency, in its Answer No. 90/2024, has provided important clarifications in this regard.

In the case of a trust appointed as universal heir, the Agency clarified that inheritance tax does not apply when assets are transferred to the trust. This is because the assets transferred to the trust are subject to a regime of asset segregation, whereby they are managed by the trustee without the beneficiaries having immediate disposal or enrichment managed by the trustee.

Inheritance tax will only be due when the assets are actually transferred to the final beneficiaries. At that time the value of the transfer will be assessed and the tax will be calculated on the basis of the inheritance tax rates.

When the trust receives immovable property, mortgage and cadastral taxes apply at a fixed rate at the time of transfer to the trust. However, when the assets are then transferred to the beneficiaries, these taxes must be paid proportionally (2% and 1% respectively) on the value of the assets.

Another important aspect concerns the mode of filing the declaration of inheritance. In cases such as this, where the trust is the universal heir, the trustee may submit the declaration in paper form, as the telematic mode is not yet available for such situations.

In summary, inheritance tax does not apply immediately to testamentary trusts. This will only be due when the assets are actually transferred to the beneficiaries. In the meantime, mortgage and cadastral taxes are paid in a fixed amount upon transfer and in a proportional amount upon final assignment of the assets.

Our staff is available to provide you with more information on this issue.