Italy: Italian Voluntary Disclosure – Issues Likely To Be Faced By Trustees With Italian Resident Settlors/Beneficiaries And/Or Italian Assets


As previously reported, Italy has launched a voluntary disclosure programme along the lines of those already in existence in the UK and the US. The new disclosure facility will come to an end on 30 September 2015.

The Italian VD in a nutshell

Full payment of unpaid taxes and interest; however:

  • reduced penalties for unpaid tax;
  • reduced sanctions for unreported assets held abroad ('FBAR' or 'RW') – level of reduction depends on whether assets held in a white-list or black-list jurisdiction;
  • reduced period of limitation for assets held in a white-list jurisdiction (2010 instead of 2004);
  • simplified tax calculation for small cases (up to €2m); and
  • protection from criminal prosecution.

Black-list or white-list?

Whether assets are held in a white-list jurisdiction or a black-list jurisdiction has an impact on the period of limitation (2004 v 2010) and the level of reduction of the sanctions.

Switzerland, Liechtenstein and Monaco have signed last-minute tax cooperation agreements with Italy and are now considered white-list jurisdictions for the purposes of the voluntary disclosure.

However, a number of jurisdictions that have signed tax information exchange agreements (TIEAs) with Italy – including the Channel Islands and the Isle of Man – continue to appear on Italy's black list. This seems extraordinary, as it would appear that early adopters of TIEAs have been penalised.

Trust – where resident?

Trustees, protectors and beneficiaries of offshore trusts will need to consider where the trust is resident. Trusts that are tax resident in Italy are subject to corporation tax, and the trustees should report foreign trust assets in the trust's annual tax return (unless the beneficiaries have a fixed interest). This also means that the trustees should obtain a tax code/UTR for the trust.

Trusts established in a black-list jurisdiction with at least one Italian resident settlor and one Italian resident beneficiary are deemed to be resident in Italy under a rebuttable presumption.

The problem is that the term 'established' is not defined in the law and there is no indication as to how one rebuts the presumption of residence. Although it would stand to reason that showing that the trust is administered outside Italy should make the trust non-resident, the position remains unclear.

Particular issues for trustees will arise when a settlor/beneficiary claims that the trust should be treated as tax resident in Italy for the purposes of the voluntary disclosure programme. In this case, the VD report should be filed by the trustees. Should they? What if there are beneficiaries who disagree with the tax residence status of the trusts?

Trust – real or a sham?

When the Italian rules on the tax treatment of trusts were first introduced, they reflected a benign approach to this legal instrument. After all, Italy was the first civil law jurisdiction to ratify the Hague Trust Convention. However, things changed at the end of 2010 when the Italian tax authorities issued a controversial circular letter in which they outlined a number of cases in which they would consider a treat a trust as a 'fictitious interposition' or sham. The concept of 'fictitious interposition' is quite different from the concept of sham developed by case law throughout the trust law world and basically encompasses most cases in which the settlor, or a beneficiary retains some degree of control over the trust.

Issues may arise when an Italian settlor is advised to file a VD report on the basis that the trust is a 'fictitious interposition' in circumstances where the trustees consider that there is no sham. Should they transfer the trust assets to the settlor? What if other beneficiaries disagree with the settlor's analysis? What is the trust's/the trustees' exposure if they decide to hold on to the trust assets? What are the potential double taxation implications for both the trust and the beneficiaries if Italy treats the trust as a nothing in the hands of the settlor and there are beneficiaries who are resident in other jurisdictions?

Communication, communication, communication

Possibly the biggest pitfall for trustees and beneficiaries alike is to deal with the Italian voluntary disclosure without communicating with each other. There are many reasons why beneficiaries may be feel pressured to file a VD report. They may have tax advisors who are unfamiliar with the tax concept. Or they may consider that treating the trust as tax resident in Italy or as non-existent may lead to tax benefits – eg, because until recently Italian resident trusts could claim participation in respect of incoming dividends and could pay such dividends to Italian resident beneficiaries without any additional tax. Whilst trustees should sit down with the beneficiaries as well as the settlor/any protector and may consider taking an opportunistic approach, their fiduciary duties mean that they will have to consider the wider picture, rather than limiting their analysis to a single tax event. Are there any succession planning issues? Is the Family likely to stay in Italy in the long term? Does the trust fulfil a governance function in respect of any underlying business? Would an Italian tax residence make a common law trust more susceptible of litigation before the Italian courts, etc.

Also, trustees and beneficiaries should consider the benefit of a full due diligence on the trust before rushing to any conclusion as to Italian tax status (resident/non-resident; opaque/transparent; 'fictitious interposition'/ substantial wealth holding vehicle).

Our experience

The above are just some of the issues that are likely to be faced by trustees with Italian resident settlors/beneficiaries and/or Italian assets. At Withers, we are fully conversant with the Italian tax issues, and we are trust law experts, which means that we can provide trustees, protectors, settlors, beneficiaries and their local advisers with technical support that takes into account both tax and fiduciary issues.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.