Italy’s Revenue Agency has clarified that gains from selling shares in a foreign company deriving more than half its value from Italian real estate are taxable in Italy, even when the company is held through a foreign trust and acts solely as a property-holding vehicle.
Italy’s Revenue Agency ruled on 5 November 2026 that selling shares in a foreign company is taxable in Italy when the company’s value comes from an Italian property.
The ruling, response no. 201 of 5 October 2026, applies even when a foreign trust holds the company and the company looks like a mere middleman.
The case
A British Virgin Islands company acts as trustee of a discretionary, opaque, non-commercial trust set up in 1997 under local law. None of the beneficiaries has ever been an Italian tax resident. The trust fully owns another British Virgin Islands company, and that company’s only asset is a home in Volterra, held for more than five years. The company has never rented the home or used it to earn income. Only the beneficiaries have used it for personal purposes.
The company has no employees and no operating structure. Another company in the trustee’s group manages it. The trust paid for the home with an interest-free loan.
The trustee’s client wanted to sell his stake in the company. He argued that the company should count as a tax intermediary under Article 37, paragraph 3, of Presidential Decree no. 600/1973. On that view, the sale would be a direct sale of the property. Because the home had been owned for more than five years, the gain would fall outside tax under Article 67, paragraph 1, letter b, of the Income Tax Code.
The agency’s reasoning
The agency explained that Article 37, paragraph 3, lets authorities assign income to the real owner, even when another person holds it on paper. The rule aims to tax whoever actually has the ability to pay.
Article 23, paragraph 1-bis, of the Income Tax Consolidated Law (TUIR) adds a separate rule. The 2023 Budget Law introduced it through Article 1, paragraph 96, of Law no. 197/2022, dated 29 December 2022. It treats gains from selling shares in non-resident companies as Italian-source income when more than half of the company’s value depends on Italian property.
The rule follows the OECD Model Convention and lets Italy tax gains on real estate holdings.
The agency rejected the trustee’s request. The Article 37 procedure identifies who receives income. It does not change what kind of transaction took place. Here, the client is selling company shares, and the home stays in the company after the sale. For tax purposes, the trust earns financial income from the share sale, not a capital gain on real estate.
What this means for sellers
The agency made clear that a share sale cannot become a property sale just because the company acts as an intermediary. What matters is what changes hands. In this case, shares change hands, not real estate.
Any gain the non-resident trust makes falls under Article 23, paragraph 1-bis. Italy can tax it because the company’s value comes entirely from the Volterra home.
