With Ruling No. 81/2026 of March 18, 2026, the Italian Revenue Agency (Agenzia delle Entrate) returns to a classic but always delicate topic: the tax qualification of foreign trusts under Article 37, paragraph 3, of Presidential Decree No. 600/1973. The case is instructive because it shows how, even against a formally impeccable trust deed (professional trustee, discretionary distributions, independent advisors), the Agency can still conclude that the trust is a look-through (interposed) trust by looking at the substance of the powers retained by the settlor/beneficiary.

The facts

The applicant, not resident in Italy at the time of the request but planning to transfer tax residence to Italy from 2026, is the primary beneficiary of a trust established in 2024 under Delaware law. Her descendants are secondary beneficiaries.

Key features of the structure:

• The 2024 trust is essentially a “re-edition” of a 2008 trust established by the applicant’s brother, in which the applicant was herself a beneficiary (although she stated she had no right to income or capital) and acted as Investment Advisor, with the power to appoint and remove the Trustee.
• In the 2024 trust, the Investment Advisor role passed to the Trustee itself (a company belonging to a banking group), and the applicant stated she had been “relieved” of the power to appoint and remove the trustee.
• A new figure was introduced: the Special Advisor, a US attorney with no family ties to the applicant, holding powers equivalent to the Investment Advisor’s with respect to the LLC interest, and — crucially — the discretionary power to appoint and remove the Investment Advisor, for the entire duration of the trust.
• The trust is irrevocable, qualifies as a complex trust for US tax purposes, and distributions are entirely discretionary.
• As of today, the trust holds no assets; in the future it will receive a financial portfolio held abroad and the entire interest in a US LLC that owns a property in New York (currently leased to the applicant’s parents, representing about 10% of the trust’s assets).
• A crucial clause (Article 1.C of the trust deed) grants the applicant a limited testamentary power of appointmentpursuant to which the applicant can direct – through a will or a revocable trust agreement that becomes irrevocable upon her death – how the remaining capital and accumulated income of the trust are to be allocated among her descendants upon her death.

The two questions raised

1. Main question: confirmation that the trust is an autonomous taxable person, not a look-through entity, under Article 37, paragraph 3, of Presidential Decree No. 600/1973.
2. Second question: if the answer to the first question is positive, confirmation that  – once she has transferred her tax residence to Italy – the applicant will not be subject to the tax monitoring obligations (RW reporting) as beneficial owner, except in the case where she holds a credit right against the trustee.

The taxpayer’s position

The applicant argues the trust is not interposed, relying on a set of elements typically valued by administrative practice: irrevocability, full trustee discretion over income and capital, the absence of any power on her part to appoint/remove the trustee or advisors (reserved to the Special Advisor for the entire duration of the trust), the professional independence of the trustee and the attorney, and a right to receive the trust assets only in remote scenarios (surviving to age 108, natural expiry of the trust, or early termination decided by the trustee).

The Revenue Agency’s opinion

The Agency first reconstructs the relevant framework: the 1985 Hague Convention (ratified by Law No. 364/1989), Article 2 of the Convention on the essential elements of a trust (asset segregation, legal title held by the trustee, the trustee’s power-duty to manage according to the terms of the trust), and prior administrative guidance (Circulars 48/E/2007, 61/E/2010, 34/E/2022), with specific reference to Circular 43/E/2009 on the categories of trusts considered “non-existent” for tax purposes).

The guiding principle is that of genuine divestment by the settlor: if the power to manage and dispose of the assets remains, even in part, with the settlor — not only under the trust deed but also as a matter of fact — the trust must be regarded as fiscally non-existent (i.e., a look-through/interposed trust), regardless of the formal labels used in the trust deed. This covers, among other things, any case in which the trustee’s managerial and dispositive power is “in any way limited or simply conditioned by the will of the settlor and/or the beneficiaries.”

Applying this test to the case at hand, the Agency notes that, despite the formal changes compared to the 2008 trust (the applicant stepping down from the Investment Advisor role, losing the power to appoint/remove the trustee), the applicant has retained significant influence over the trust assets through the clause on the limited testamentary power of appointment: through a will or a fiduciary agreement, she can effectively decide — in a substantially binding way — how the remaining capital will be distributed among her descendants. According to the Agency, this in fact conditions the trustee’s management, which, although discretionary “on paper,” must take into account the dispositive instruments the applicant can put in place.

The conclusion

The trust is qualified as interposed (look-through) with respect to the applicant, due to the lack of genuine divestment of the assets. As a consequence, starting from the tax year in which the applicant transfers her residence to Italy:

• she will be required to declare the trust’s income as her own;
• she will be subject to tax monitoring obligations (RW reporting) as beneficial owner;
• she will be subject to IVIE (the Italian tax on real estate held abroad, for the New York property held through the LLC) and IVAFE (the Italian tax on financial assets held abroad, for the financial portfolio).

As usual, the Agency notes that the opinion is given on the basis of the facts as represented in the request, assumed to be true and accurate, and that the tax authorities retain full power to review the matter should other facts, acts, or transactions not disclosed in the request come to light. Also, the ruling is not binding on the applicant, who is free to take a different position when it is time to file her income tax return, and eventually challenge any audit reflecting the agency’s different position in front of the tax court.

A questionable step in the reasoning: does a testamentary power of appointment really amount to control?

The point on which this ruling is most exposed to criticism is precisely the one that carries the whole decision: the Agency treats the limited testamentary power of appointment as if it were a present power to direct the disposition of the trust assets, sufficient on its own to defeat the applicant’s divestment and render the trust fiscally transparent.

That equivalence is debatable on several grounds.

• Timing and object of the power. A testamentary power of appointment, by definition, produces no legal effect until the holder dies, and it operates only on whatever is left in the trust at that future date. During her lifetime, the applicant has no ability to withdraw, redirect, pledge, or otherwise currently benefit from the trust assets by exercising this power — she cannot use it to recall property to herself, to a nominee, or to her own estate’s creditors. What is deferred to her is a choice among a closed class of permitted appointees (her own descendants), not a power over the property as such. Conflating “the power to say who among my children gets what” with “the power to control the assets” stretches the ordinary meaning of dispositive control used in the divestment test.
• No benefit to the appointer, no reversion. The classic markers of a sham or interposed trust – the settlor’s or other person’s ability to recall the assets, to compel distributions to herself, or to direct the trustee’s day-to-day management – are all absent here. The applicant cannot appoint the assets to herself, and the power is not a general power of appointment in the technical sense (it does not allow appointment to the holder, her estate, her creditors, or the creditors of her estate). This is precisely the distinction other legal systems draw when assessing whether a power of appointment causes the holder to be treated as owner of the underlying property: a limited (or “special”) power of appointment, exercisable only in favor of a defined class and only through a will, is routinely treated as compatible with genuine divestment, unlike a general power of appointment.
• A very common, and previously accepted, drafting technique. Naming a restricted class of future appointees, with the final allocation left to a beneficiary’s testamentary instructions, is a standard feature of US trust drafting precisely to preserve flexibility for family succession while keeping the settlor/beneficiary out of the day-to-day administration of the trust. Prior Italian practice (including the same circulars cited in this ruling) has generally accepted that indicating who, among a defined class, should receive distributions does not by itself defeat the trustee’s independence — the concern has always been powers that let the settlor or beneficiary redirect assets back to themselves or dictate the trustee’s current management, not a mechanism operating only upon the beneficiary’s death and only within a fixed group of successors.
• The practical consequence, if generalized, is very wide-reaching. If a mere testamentary limited power of appointment is enough, on its own, to make a trust “interposed,” then a very large share of US-law discretionary trusts — including many with no other connection to the settlor and genuinely independent trustees — would fail the Italian divestment test, since this clause is close to boilerplate in US estate planning. That result sits uneasily with the rest of the Agency’s own reasoning in this same ruling, which otherwise acknowledges full trustee discretion, professional and unrelated advisors, and the applicant’s loss of every other lever of control.

Why this ruling matters

This case confirms a now well-established approach: the Agency does not stop at the formal wording of the trust deed (trustee discretion, advisor independence, irrevocability), but looks for the substantive power retained by the settlor/beneficiary — even when that power is expressed through indirect tools such as a limited testamentary power of appointment. The fact that the 2024 trust was specifically restructured to remove the applicant from the formal roles of Investment Advisor and from the power to appoint/remove the trustee was not enough: the power-of-appointment clause, which is common in US trust practice, was read as an element that preserves de facto control over the trust’s management.

For anyone structuring or inheriting a foreign trust ahead of a move to Italian tax residence, the practical takeaway is that every clause granting the settlor or beneficiary decision-making power – even indirectly, or only in relation to future events such as the trust’s termination – needs to be scrutinized, not just those relating to the day-to-day management of the assets.