Foreign Trusts Subject to Disclosure in Italy

 by Marco Rossi

Every time a trust has connections with Italy and is given legal effects or enforced in Italy, the trustee will need to collect, keep and disclose (if required) information on beneficial ownership of the trust and, potentially, report such information in a special Trust section of the Italian Business Register. These new trust disclosure rules derive from the Italian bill  transposing into national law the EU Fourth Anti-Money Laundering Directive (2015/849).

The Directive requires trustees of any express trust governed under the law of a Member State to obtain and hold information on the beneficial ownership of the trust, inclusive of the identity of the settlor, the trustee, the protector (if any), the beneficiaries, and any other natural person holding any authority or exercising effective control over the trust. When the trust generates legal or tax consequences in the legal system of a Member State, such information has to be reported in a central register of that Member State. 

The Italian bill implementing the Directive imposes such duties on “trustees of express trusts governed in accordance with Law dated October 16, 1989 n. 364.  Such is the law by which Italy ratified the 1985 Hague Convention on Law applicable to Trusts and their recognition. 

Italy does not have a body of national statutory provisions on trusts, but the enforcement of the 1985 Hague Convention by the Law n. 364 of 1989 permits to recognize and give legal effects in Italy to trust created under and governed by foreign law.

As a result, every time a foreign trust is to be legally used in Italy, and is designed to produce legal and tax effects there, it can be considered a trust “governed in accordance with Law n. 364 of 1989”, thereby triggering the know your customer and disclosure obligations set forth in the Directive. Therefore, it will be automatically subject to the new disclosure obligations, including the registration in a special Trust section of the general Business Register. Foreign trustees of a foreign trust that has a connection with Italy, are potentially subject to those rules, and need to pay close attention to the their new reporting obligations under the new rules.

Situations that fall within the scope of the disclosure rules include common cases in which a foreign trust has Italian resident beneficiaries, or owns movable or immovable assets located in Italy. In those cases, the beneficiaries in order to claim the distribution of income or assets from the trust need to put in place the procedure to have the trust recognized and enforced in Italy. The same happens when a foreign beneficiary claims the distribution of the trust’s Italian assets pursuant to the trust.

Even when the settlor of a foreign trust is an Italian individual, the new rules would apply. Indeed, the settlor may need to rely on the trust to separate herself from the assets transferred to the trust, and claim that the trust assets and income belong to somebody else who should bear the responsibility of tax filing, payment and reporting relating to the trust. To the effect, the trust would have legal and tax consequences in Italy, which would put it within the scope of the new disclosure rules.   

The Directive set forth a deadline for its implementation into EU member’ States’ law, currently expiring on June 26, 2017. The Italian bill once enacted into law will need legislative decrees with enforcement provisions to be adopted by the Government pursuant to the legislative authority granted therein.

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