The recent decree on indirect taxes, approved by the Council of Ministers on August 7, introduces a noteworthy change in the taxation of trusts.
Taxpayers now have the option to choose between immediate taxation upon the transfer of assets to the trust or the application of the donation tax when the trustee distributes the assets to the beneficiaries.
This change allows for a return to the previous system, where the donation tax could be paid at the time of the trust's funding, rather than waiting until the distribution to the beneficiaries.

Historically, following the Dl 262/2006, the tax authorities supported the idea of taxing the trust at the time of funding, with no tax implications at the time of asset distribution.
This stance was progressively overturned by the Supreme Court, which ultimately decided that the entry of assets into the trust should be neutral, and taxation should occur when the beneficiaries actually receive an increase in their personal wealth.
This position was reflected in the 2022 circular, which added that if the beneficiaries have full and enforceable rights at the time of the trust's establishment, the donation tax should be applied immediately.

The new reform reintroduces the possibility for the settlor or trustee to voluntarily pay the donation tax at the time of the asset transfer to the trust, providing taxpayers with greater fiscal certainty.
If the immediate taxation option is chosen, and the beneficiaries are not identified, the highest tax rate (currently 8%) will apply without any exemptions.
This means that if the tax is paid upon entry, no further tax will be due upon distribution, regardless of any changes in the trust's assets or tax rates over time.

For example, if a trust is funded with assets worth 100,000 euros and the tax rate is 6% without exemptions, paying the tax immediately will prevent any future tax liabilities, even if the assets grow to 1 million euros and the tax rate increases to 20%. This also benefits the tax authorities by securing revenue in advance.

To avoid interpretative uncertainties, the reform explicitly states that the tax paid by the settlor or trustee is final and non-refundable, even if the asset transfer to the beneficiaries does not occur.
This option for immediate tax payment also applies to already established trusts.

Critical aspects and potential issues:

• Determining the exact moment when beneficiaries have enforceable rights.

• Potential for higher immediate tax rates without exemptions.

• Ensuring clarity in the application of the new rules.

Common pitfalls and errors:

• Misinterpreting the conditions under which immediate taxation applies.

• Overlooking the non-refundable nature of the tax paid in advance.

• Failing to consider the long-term implications of immediate versus deferred taxation.

Suggestions and useful indications:

• Carefully evaluate the financial implications of immediate versus deferred taxation.

• Consult with tax professionals to understand the specific impact on your trust.

• Monitor any further clarifications or amendments to the reform.