The Case of Foreign Trusts

The year 2025 has been a crucial one for foreign trusts. 
Two developments, in particular, have set the course: 

• Rulings on advance tax rulings (interpelli) no. 144 and no. 145 issued by the Italian Revenue Agency, which clarified the tax treatment of income and the autonomy of foreign trusts; 
• Judgment no. 18084/2025 of the Court of Cassation, which established the limits of enforceability of a trust in the event of the settlor’s bankruptcy. 

Together, these pronouncements show how the Italian tax authorities and judiciary seek to balance the use of trusts between planning purposes and the protection of creditors and the State. 

What a Trust Is and How It Works 
The trust is an institution originating in common law countries and recognized in Italy since 1992, following ratification of the Hague Convention (1985). 

It works as follows: 

• the settlor transfers part of his or her assets to a trustee (fiduciary manager); 
• the trustee manages those assets not for himself but for the beneficiaries, in accordance with the rules established in the trust deed; 
• in some cases, a protector oversees the trustee’s activity. 

Main effect: asset segregation. Assets held in trust do not form part of the settlor’s estate, nor of the trustee’s or the beneficiaries’ estates, and in principle cannot be reached by their creditors. 

The Case of Rulings 144 and 145/2025 

Trust Structure 

• governed by English law; 
• trustee: licensed Maltese company; 
• protector: independent Italian lawyer; 
• investment adviser: licensed Swiss company; 
• beneficiaries: wife, daughter, and descendants; 
• duration: 125 years; 
• settlor excluded from any benefit (excluded person). 

Dividends: No Equivalence with Companies 

• Dividends distributed to non-residents are taxed at 26%. 
• For EU/EEA companies, a reduced rate of 1.20% applies. 
• The trustee argued that the trust, being fiscally assimilated to a company in Malta, should benefit from the reduction. 
• The Revenue Agency replied in the negative: the trust does not have a corporate form → dividends taxed at 26%. 

Capital Gains: Exemption Confirmed 

• Capital gains on Italian shares are not subject to tax if the entity is resident in a white list country. 
• Since the trust is effectively subject to tax in Malta, the Revenue Agency confirmed the exemption → capital gains not taxed in Italy. 

Ruling 145/2025: The Risk of Interposition 

When is a Trust “Interposed”? 
A trust is considered “interposed” when the settlor has not truly divested himself of the assets and continues to control them. In such cases, the trust is merely an “empty shell,” and the income is taxed directly in the hands of the settlor. 

The Case at Hand 

• settlor excluded from benefits; 
• trustee vested with full powers; 
• independent protector with the authority to remove the trustee; 
• settlor without revocation powers. 

The Revenue Agency acknowledged a genuine divestment. The trust is treated as an autonomous entity, not an interposed one. 

Court of Cassation (Judgment No. 18084/2025): Trusts and Bankruptcy 

At the same time, the Supreme Court addressed the issue of the enforceability of a trust in the event of the settlor’s bankruptcy. 

The Principle Established 
The rights of creditors prevail over those of the trust. 

The Rules Set Out 

• The trust deed and contributions must bear a date certain prior to the declaration of bankruptcy (Article 2704 of the Civil Code). 
• For real estate, registration is also required. 
• Italian rules protecting creditors (Article 45 of the Bankruptcy Law, avoidance action) also apply to trusts governed by foreign law. 
• Judges must assess the actual purpose and legitimacy of the trust: if it is used solely to defraud creditors, it is unenforceable. 

Conclusion: the trust is not an absolute shield against creditors. 

Why These Rulings Matter 
From 2025, four key lessons emerge: 

1. Tax treatment: no relief on dividends, but exemption on capital gains is possible if the trust is located in a white list country. 
2. Fiscal autonomy: a well-structured trust, with the settlor excluded and independent governance, is recognized as an autonomous entity. 
3. Creditor protection: even valid trusts must comply with Italian rules on enforceability. In the event of bankruptcy, creditors prevail. 
4. Legitimacy: the decisive factor is the seriousness of the structure and its purposes, both from a tax and insolvency perspective. 

Conclusion 
The year 2025 marked a turning point: 

• the Italian Revenue Agency reaffirmed that serious, well-structured trusts are recognized and respected; 
• the Court of Cassation confirmed that creditors cannot be sacrificed by trusts used as improper protective shields. 

In short, the message is twofold: 

• trusts can be valid tools for estate and tax planning; 
• but they must be established with transparency and in compliance with Italian rules, otherwise they risk being disregarded by both the tax authorities and the courts.