Italian Real Estate Investment Trusts And Taxation: Find Here All Costs

Italian Real Estate Investment Trusts and taxation: what is Real Estate Investment Trust?

Before analysing the Italian legal framework on Real Estate Investment Trusts and their taxation, it is worth defining what is a Real Estate Investment Trust, which subjects are involved and to what aims.

A Real Estate Investment Trust is an instrument allowing to keep and protect properties, since it is structured in separated sub-funds. This means that trust assets are autonomous and stay separated from Settlor's, Trustee's, and Beneficiary's properties. Indeed, they are protected from creditor claims, since they are non leviable assets.

Real Estate Investment Trust assets can be:

Real properties of any kind; Company shares and stocks; Current accounts, deposits and investments in general; -Ships, airplanes, cars; Financial instruments (such as mutual fond shares); Works of art or diamonds. Italian Real Estate Investment Trusts and taxation: indirect taxation

In matters of Real Estate Investment Trusts and taxation, it is worth noticing that in Italy, since the earmarked fund tax is always due, Real Estate Investment Trusts are subject to succession/gift and hypocadestral taxes.

More in detail, whenever a real estate located in Italy is given in trust, the following taxes are due:

Mortgage and cadastral taxes; In case only bare ownership is transferred, usufruct value and right of habitation tables (established in relation to the Settlor's age) will be applied.

Succession/gift taxes, proportionate to and determined in relation to the family or kinship relationship between Settlor and Beneficiary; In matters of succession/gift taxes, the Italian Court of Cassation (Tax and Civil Division), with Judgement no. 13626/2018, has established that - as in any other case of constitution of a earmarked fund - in case of an actual transfer of properties or rights by means of a Trust, the latter is subject to succession/gift taxes. According to the Italian Court of Cassation, then, any transfer of properties or rights is subject to an earmarked fund tax, since through said transfer (even though free of charge) the Trustee is potentially granted economic capacity.

Succession/gift tax should be paid by Beneficiaries according to the following provisions:

Spouse and direct relatives (children-parents and in general ascending and descending relatives): 4% with deductible, up to an inheritance of 1,000,000.00; Brothers and sisters: 6% with deductible of 1,000,000.00...