Interposed San Marino Law Trust: Taxation of Income, RW Reporting and IVAFE Charged to the Beneficiaries
The Italian Tax Authority, in its Ruling no. 125/2026 published on 18 June, clarified that a family trust (even if formally resident in Italy and duly established under the Law of San Marino of 1 March 2010) must be regarded as fiscally “interposed” where the trustees lack genuine decision-making and management autonomy. In such case the trust does not qualify as an autonomous taxable person: its income is attributed directly, on a pro-rata basis, to the beneficiaries as the actual owners of the segregated assets.
The case arises from an irrevocable family trust, structured in two sub-funds, established by the settlor (now deceased) to protect his minor daughter (final beneficiary) and his partner (life beneficiary). The applicant (trustee, potential final beneficiary, as well as shareholder and director of the family holding company) sought to qualify the trust as “transparent”, with income taxed in the hands of the beneficiaries as investment income (Article 73, paragraph 2, and Article 44, paragraph 1, letter g-sexies, of the Italian Income Tax Code - TUIR).
The Tax Authority rejected this approach. Recalling Circulars no. 61/E of 2010 and no. 34/E of 2022, it identified several elements ruling out any genuine dispossession of the settlor and any independence of the trustees: the life beneficiary is also a trustee and holds the usufruct of a property held in trust; the other trustee is a shareholder and director of the company to which the fund may grant advances “with no limit of amount and with no discretion” for liquidity needs; the guardian had professional ties with the family, having also served on the company’s board of statutory auditors. This results in a power of interference by the beneficiaries, exercised through the trustees.
Having classified the trust as a mere formal screen, two consequences follow. First, the income of which the trust “appears to be the owner” is taxed by attribution directly to the beneficiaries, according to the income categories set out in Article 6 TUIR (and not as investment income proper to a transparent trust). Second, the tax-monitoring obligations (Section RW, Article 4 of Law Decree no. 167/1990) and the obligation to declare and pay IVAFE fall directly on the beneficiaries, in proportion to their share of the foreign financial assets held in the trustees’ name.
In short, Italian residence and the formal establishment of the trust alone are not sufficient: the trustees’ autonomy must be assessed in practice, avoiding any overlap of roles (trustee/beneficiary/shareholder) and any clause subordinating the management to the needs of the beneficiaries or of related companies. Otherwise, as in the case at hand, it will be the beneficiaries, and not the trust, who must report the income under the relevant categories, complete Section RW and pay IVAFE on the foreign assets.
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