16 November 2020

Withers welcomes clarification of protectors' tax reporting obligations in Italy


Giulia Cipollini
Partner | IT

The Italian Tax Authority (“ITA”) has issued an important clarification of the reporting duties of Italian tax resident protectors of non-Italian resident trusts. ITA has confirmed that such protectors are not obliged to fill in a special section of the income tax return form (the “RW Form”) dealing with foreign assets.

The RW Form often results in a burdensome procedure for taxpayers and failure to be compliant with the reporting requirements can trigger penalties ranging from 3% to 15% of the undeclared amounts (6% to 30% if assets are held in a “black list” country).

This clarification from the ITA is of utmost importance because it strengthens the argument made repeatedly by the Withers team in Milan to consider – where the circumstances are applicable – an Italian resident protector as a subject who is not obliged to fulfil reporting tax obligations.

The ITA has excluded the protector as an “effective owner” (as defined by Italian tax law and anti-money laundering provisions) of the trust, grounding its interpretation on the powers held by the protector. The latter is able to supervise the conduct of the trustee, and his role is carried out through the prior and compulsory consent that the trustee was required to obtain from the protector to exercise the discretionary powers granted to him by the trust deed.

The case at hand concerned a tax interposed foreign trust owning (i) a 100% foreign shareholding company, (ii) foreign bank accounts and (iii) a credit deriving from an interest-bearing loan. Furthermore, the trust’s Italian tax resident beneficiary had regularly filled in the RW Form.

In light of all the above, we recommend that Italian protectors collect/provide declarations confirming that their role is merely supervisory, and that trustees should review their trust deed accordingly. These actions would also be beneficial for the protector, as well as for anyone else involved in the trust structure, if required in the future to confirm the protector’s position vis à vis the ITA.

Giulia Cipollini Partner | Milan

Category: Article