The Italian Revenue Agency clarifies that trust beneficiaries who receive only income distributions—without any ownership, management rights, or investment control—are not liable for IVAFE, the country's wealth tax on foreign financial assets.
Italy’s Revenue Agency announced, through Response No. 84 on 25 March 2026, that Italian tax residents who receive only income from foreign trusts without any ownership rights to the underlying assets are not required to pay IVAFE (Italy’s VAT on financial assets held abroad).
The ruling addresses a US citizen living in Italy who benefits from an irrevocable trust created by his stepfather and managed by a US-based trustee. The trust holds various financial instruments, including money market funds, stocks, ETFs, and US government bonds.
Under the trust agreement, the beneficiary receives only income generated by these assets throughout his lifetime. He has no capital rights, management authority, or ability to influence how the assets are invested or distributed. Legal ownership remains entirely with the trustee.
Key requirements for exemption
The Revenue Agency determined that IVAFE does not apply when the beneficiary:
- Exercises no management powers over the trust assets
- Employs no personal capital in the trust
- Bears no investment risk
- Holds no ownership or possession rights to the financial instruments
The Agency referenced Article 19, paragraph 18 of Legislative Decree no. 201/2011 and Circular no. 34/E from 22 October 2022, which established that identified beneficiaries must report their trust interest in the RW section but owe no wealth tax without actual asset ownership.
Since the taxpayer’s only right is receiving income—with all financial instruments remaining under the trustee’s complete control—no IVAFE payment is required. Without ownership or possession, the fundamental basis for taxing foreign-held financial assets simply does not exist.
