The Private Wealth & Private Client Review: Italy
Italy is home to individuals of considerable wealth. In particular, medium and large businesses in Italy tend to be owned and managed by Italian families who need advice on the structuring of the generational transfer of the business. Furthermore, Italy attracts foreigners that relocate to Italy under the Italian forfait (lump sum) tax regime for individuals moving to Italy (see Section II.iv). Italy also attracts significant investments, including those in Italian real estate, by non-resident private clients, who need advice on the structuring of the acquisition, ownership and disposal of such investments.
i Income tax
Residents are subject to income tax on their worldwide income, including capital gains. Non-residents are subject to income only on their Italian-sourced income.
For income tax purposes, an individual is regarded as a resident of Italy if, for most of the tax period (i.e., the calendar year), he or she is registered with the Official Register of Italian residents, has his or her habitual abode in Italy, or has the main seat of his or her business and interests in Italy (similar to the Organisation for Economic Co-operation and Development (OECD) concept of a 'centre of vital interests').
The total taxable income of individuals is subject to income tax at progressive rates up to 43 per cent, plus local surcharges that depend on the municipality of residence.
That said, income from financial assets, as well as capital gains upon the sale of such assets, is generally taxed in the hands of individuals at a flat rate of 26 per cent (12.5 per cent on the interest and capital gains on Italian governmental bonds and bonds issued by foreign states providing for exchange of information). This favourable regime does not, however, apply to dividends and capital gains from participations in unlisted companies and partnerships established in blacklisted jurisdictions, which are entirely liable to tax.
Capital losses on financial assets can offset capital gains of the same category and be carried forward for five years. Furthermore, an optional regime is available whereby capital gains and losses on certain financial assets are taxed on an accrual – rather than cash – basis and certain income from financial assets may be offset by these accrued capital losses.
Capital gains realised by individuals upon the sale of real estate, either owned for more than five years or inherited, are generally exempt from income tax. Furthermore, Italy does not tax capital gains realised by individuals upon the sale of assets other than financial assets and real estate (such as paintings or statues) unless such gains are realised in the context of a business or of a professional activity (or speculative transaction).
Resident individuals are subject to reporting obligations on foreign-held assets. Since 2013, these obligations also apply to foreign-held assets held by companies, partnerships, trusts, foundations and other entities to the extent that the resident individual qualifies as the beneficial owner for Italian anti-money laundering purposes. The broadening of the definition of beneficial owner, which follows the implementation of the European Union (EU) Directive 2015/849 of 20 May 2015 as amended by the EU Directive 2018/843 of 30 May 2018, has triggered the broadening of the scope of these reporting obligations. Failure to comply with these reporting obligations may result in very severe penalties.
Controlled foreign corporation (CFC) rules may apply to companies, partnerships or other entities established in jurisdictions where the following conditions are simultaneously met:
- the effective tax rate is lower than 50 per cent of the effective tax rate that would have applied if the entity was a resident of Italy; and
- more than one-third of the proceeds received by the foreign entity originate from certain passive income sources explicitly listed in the income tax code (e.g., interest, dividends, royalties, income from financial leasing, income from insurance, banking and other financial activities).
Italy does not have a part-year residence rule. Indeed, in any calendar year, an individual either is or is not a resident for the whole year. Consequently, if an individual moves to Italy in the second half of the calendar year, he or she will be regarded as non-resident in the year of transfer because the conditions for tax residence will not be met for most of the tax period. This feature of the Italian tax system may allow for the optimisation of the tax regime upon transfer of residence. On the other hand, if an individual moves to Italy in the first half of the calendar year, he or she will be regarded as resident for the whole year of transfer.
Finally, no exit tax is levied on individuals (the exception being for assets held in the capacity of entrepreneur).
ii Inheritance and gift tax
Inheritance and gift tax is levied on worldwide assets if the deceased or donor had his or her habitual abode in Italy on the date of demise or gift, otherwise it only applies to Italian situs assets.
In particular, transfers upon death and gifts are subject to inheritance and gift tax at the following rates and with the following exempt amounts:
- 4 per cent if the transfer is made to spouses and direct descendants or ancestors; here, the transfer is subject to tax on the value exceeding €1 million (this exempt amount applies to each beneficiary);
- 6 per cent if the transfer is made to brothers and sisters; here, the transfer is subject to tax on the value exceeding €100,000 (this exempt amount applies to each beneficiary);
- 6 per cent if the transfer is made to relatives up to the fourth degree, to persons related by direct affinity as well as to persons related by collateral affinity up to the third degree; and
- 8 per cent in all other cases.
Same-sex civil unions have been recently introduced under Italian civil law (same-sex marriages or civil unions executed abroad are assimilated to Italian same-sex civil union). Such introduction has the effect of making them subject to the same tax regime (e.g., rates and exempt amount) applicable to marriages.
The rules for the calculation of the taxable base may be extremely favourable. For instance, the value of unlisted participations in companies or partnerships is generally equal to the corresponding quota of the book net equity of the company or partnership resulting from the latest balance sheet drawn up pursuant to the applicable law. The value of the Italian real estate is, in principle, equal to its fair market value, but the tax office cannot dispute the value declared if it is at least equal to the value resulting from the cadastral registers, which is generally much lower than the fair market value.
Exemptions from inheritance and gift tax may apply to assets of cultural value, while Italian governmental bonds are free from inheritance tax.
An exemption from inheritance and gift tax applies to the transfer of businesses and participations in companies and partnerships to spouses or descendants.
For participations in Italian-resident companies, the exemption is subject to the additional condition that the recipient acquires or reaches a controlling shareholding. The control must be retained for five years following the transfer; otherwise, the exemption will be clawed back. The tax authorities have clarified that the exemption would apply to the transfer of a controlling shareholding in joint ownership to a spouse or descendants and may apply to the settlement of a controlling shareholding into a trust for their exclusive benefit. For instance, if an individual holding a 60 per cent participation in an Italian-resident company were to transfer a 30 per cent participation to each of his or her two children, the exemption would not apply. On the other hand, the settlement of the 60 per cent participation into a trust for the exclusive benefit of the two children would qualify for the exemption, provided that the trust was properly structured.
The application of the exemption to non-resident companies is a source of debate. According to one interpretation, the exemption is not available to non-resident companies, which would conflict with EU law, where applicable. According to a second interpretation, the exemption applies to non-resident companies irrespective of the control condition. According to a third interpretation, the exemption applies to non-resident companies under the same control condition applicable to resident companies. In a private ruling dated 2 August 2011, the tax authorities held the third interpretation to be the case.
Finally, individuals who are subject to Italian inheritance and gift tax on their worldwide assets can benefit from the Italian inheritance, estate and gift tax treaties, which may preclude the levy of more burdensome taxes in other jurisdictions. Treaties for the avoidance of double taxation on inheritance and estate tax are in force with Denmark, France, Greece, Israel, Sweden, the United Kingdom and the United States. The treaty with France also covers gift tax. For instance, a UK-domiciled or deemed domiciled individual may transfer his or her habitual abode to Italy and become immediately exposed to Italian inheritance tax on his or her worldwide estate, but, as a consequence, he or she becomes treaty protected from UK inheritance tax on non-UK situs assets.
iii Wealth taxes
Italian legislation does not provide for a comprehensive wealth tax. In very general terms, wealth taxes apply at proportional rates to the following:
- Financial assets held in Italy: foreign assets deposited with an Italian financial intermediary should be regarded as assets held in Italy for the purpose of wealth taxes provision. The annual rate is 0.2 per cent. The taxable base is calculated based on the value of the assets laid down in the periodic reports issued by the Italian financial intermediary with which the assets are deposited. Current accounts are subject to tax at a fixed negligible amount.
- Financial assets held abroad by resident individuals: the annual rate is 0.2 per cent. The taxable base depends on the type of financial asset. In general terms, the taxable base is the trading value for listed assets. In other cases, the taxable base is generally the nominal value. Current accounts are subject to tax at a fixed negligible amount.
- Real estate located abroad held by resident individuals: the annual rate is 0.76 per cent. The taxable base is generally equal to the purchase price of the real estate, but if the real estate is located in an EU or European Economic Area (EEA) Member State providing for exchange of information, the taxable base is equal to the value resulting from foreign cadastral registers or other deemed value relevant to foreign income, wealth or transfer taxes and, in the absence of such value, is generally equal to the purchase price.
Another tax applies on the value of Italian real estate, calculated on the basis of the value resulting from the cadastral registers. Favourable tax regimes may apply to, for example, the main abode.
iv New forfait tax regime for individuals moving to Italy
The Budget Law 2017, which entered into force on 1 January 2017, introduced a special forfait tax regime (the substitute tax regime) for individuals who transfer their tax residence to Italy. This regime is meant to attract high net worth individuals to Italy.
Conditions for the substitute tax regime
The option for the substitute tax regime is available to individuals (whether Italian or foreign nationals) who acquire Italian tax residence. The substitute tax regime is subject to the following conditions:
- the individual must have been non-resident in Italy for Italian tax purposes in at least nine of the 10 years prior to the first year of effect of the option; and
- the individual must pay the substitutive tax in a timely fashion and opt for the aforementioned substitute tax option in the annual tax return.
Substitute tax regime
The substitute tax regime is as follows:
- all foreign-source income and gains are subject to a substitute tax (in lieu of the levy of income tax according to general rules) equal to €100,000 per year (such income and gains are not subject to any additional taxation if remitted to Italy);
- foreign assets are not subject to wealth taxes, inheritance and gift tax, and reporting obligations;
- as an exception, foreign-source capital gains on substantial shareholdings realised in the first five years of Italian tax residence are subject to income tax according to general rules. As a consequence, during such five-year period, substantial shareholdings are subject to reporting obligations. This exception is a specific anti-avoidance rule and, therefore, depending on the specific facts and circumstances, can be disapplied through an advance ruling; and
- the individual can opt for one or more foreign states to be excluded from the scope of the substitute tax regime.
Duration of the substitute tax regime
The option for the substitute tax regime is effective up to a maximum period of 15 years. The option can be revoked by the individual but, if revoked, is no longer available.
Possible extension to relatives
The substitute tax regime can be extended to one or more qualifying family members against the payment of an annual substitute tax of €25,000 (rather than €100,000) per family member benefiting from such a regime. Therefore, if, for example, two spouses transfer their tax residence to Italy and both of them wish to benefit from the substitute tax regime, the overall annual substitute tax would be €125,000.
Optional ruling procedure
A ruling on the application of the substitute tax regime may be requested, even before the transfer of tax residence to Italy, to an ad hoc office of the Italian tax authorities.
v Favourable tax regime for workers moving to Italy
Italian legislation provides for a favourable optional tax regime meant to attract workers to move to Italy and carry out their job in the country (an 'impatriate' tax regime). The main conditions are as follows:
- the individual must have been non-resident for Italian income tax purposes for two years prior to the first year of Italian tax residence;
- applicants to the impatriate regime must remain tax-resident in Italy for at least two tax years after their relocation; and
- the working activity must mainly be carried out in Italy.
An individual moving to Italy and opting for the impatriate regime benefits from a 70 per cent (90 per cent for individuals moving to certain regions, namely, Abruzzo, Basilicata, Calabria, Molise, Puglia, Sardinia or Sicily) exemption on his or her Italian source employment, self-employment and business income for up to five tax years.
Subject to certain conditions (e.g. the beneficiary purchases an Italian residential real estate or the beneficiary has at least one minor or dependent child), the partial exemption may apply for another five years (during this additional period, the Italian source employment, self-employment and business income is exempt for 50 per cent or 90 per cent of its amount, depending on the circumstances).
In relation to income from self-employment and business income, the Impatriate regime is subject to the State aid de minimis rules.
vi Favourable tax regime for retirees moving to Italy
The Budget Law for 2019 introduced a new optional regime meant to attract individuals who receive a foreign-source pension to move to Italy (the 'retirees regime'). An individual qualifies for the retirees regime if he or she has been non-resident of Italy in the five tax years prior to the first year of Italian tax residence and if he or she receives a foreign-source pension (i.e., a pension paid by a non-Italian resident entity). An additional condition is that the individual must relocate to certain areas of Italy (i.e., any municipality in Abruzzo, Basilicata, Calabria, Molise, Puglia, Sardinia or Sicily that has a population of less than 20,000 residents). Under the retirees regime, an individual is subject to a 7 per cent flat tax on all of his or her foreign-source income, and gains and benefits from an exemption from wealth taxes on foreign assets and from the reporting obligation on such foreign held assets. The regime is available up to 10 tax years.
i Applicable law
Italian international private laws dealing with successions are laid down in EU Regulation No. 650/2012 of 4 July 2012. The Regulation provides for the general rule whereby the law applicable to the succession as a whole will be the law of the state of habitual residence of the deceased at the date of death. In limited circumstances, the law of the state the deceased was manifestly more closely connected with at the date of death will apply. An individual can, however, opt for the succession law of the state whose nationality he or she possesses either upon the exercise of the option or upon death. In the case of multiple nationalities, the individual can choose the law of any of the states whose nationality he or she possesses. The conflict of law rules provided by the chosen law will not apply.
ii Forced heirship rules and succession agreements
Italian succession law provides for forced heirship rules
The reserved quota of the estate, which is reserved to forced heirs and, therefore, cannot be freely disposed of, depends on the composition of the family of the deceased upon death. For instance, if the spouse and three children are the forced heirs, 50 per cent of the estate of the deceased is the reserved quota for the children, to be divided in equal shares. In this case, the reserved quota for the spouse is equal to 25 per cent of the estate of the deceased, while the remaining 25 per cent of the estate can be freely disposed of.
For the purposes of calculating the reserved quota, the value of the estate of the deceased is equal to the value of all the assets owned at the time of death, net of any debts, plus the value of all assets that were gifted by the deceased during his or her life.
Italian law provides for the discretionary right of the forced heirs to claim the 'reduction' of the transfers made during lifetime or by way of will that prejudice their reserved quota. This clawback action – 'reduction action' – if exercised, is aimed at making transfers in excess of the disposable quota partially or totally ineffective. The transfers will remain fully valid and effective should the forced heirs not exercise the reduction action.
Succession agreements are null and void under Italian law, so that an individual cannot waive, or in any other way dispose of, his or her rights, including forced heirship rights, under a future succession.
The ban on succession agreements has only one exception: under a family pact a business, or a qualifying participation in a company carrying on a business, can be transferred to descendants under an agreement between all the living forced heirs, whereby the forced heirs, not receiving their share of the business or of the qualifying participation, may either be granted a cash amount or other assets by the transferees, or renounce, in whole or part, their reserved quota. It is fair to say that the family pact has not been widely used.
Wealth structuring and regulation
Despite the fact that Italy is a civil law jurisdiction, trusts are widely used, particularly for the purpose of governing the generational transfer of businesses. In this context, the use of trusts may also achieve the exemption from inheritance and gift tax for the transfer of a controlling shareholding (see Section II.ii).
Recognition of foreign trusts
Italian civil law does not regulate trusts, but trusts regulated by foreign laws are recognised in Italy pursuant to the Hague Convention on the Law Applicable to Trusts and on their Recognition, which was ratified by Italy in 1989. Furthermore, in 2016, specific civil law provisions have been introduced to regulate trusts created for the benefit of individuals with qualifying disabilities. In any event, the settlement of assets into a trust is considered a gift from a succession law perspective, therefore it is relevant to the calculation of the value of the estate of the deceased for the purpose of calculating the reserved quota (see Section III.ii).
The issue of the recognition of 'domestic trusts'2 has also arisen. The prevailing case law has taken the view that domestic trusts must be recognised to the extent that they pursue a legitimate interest, but no explicit judgment of the Supreme Court has ever been issued on this specific point.
Tax regime of trusts
Income tax provisions recognise trusts as taxable persons for corporate income tax purposes, subject to the comments below on transparent and disregarded trusts.
A trust qualifies as resident if either its seat of management (similar to the OECD's notion of a 'place of effective management') or its main object (the place where the day-by-day activities mainly take place) are located in Italy for most of the tax period. Deeming rules may apply to trusts established in tax privileged jurisdictions. Furthermore, the tax authorities take the view that, if a trust holds only real estate and such real estate is located mainly in Italy, its main object is located in Italy, and, accordingly, the trust is resident in Italy.3
Under the assumption that a trust, resident or otherwise, does not carry out a business activity, it may benefit from the 12.5 per cent or 26 per cent final withholding taxes or substitute taxes on income and capital gains from financial assets that would apply to individuals (see Section II.i) and from the exemption from income tax on capital gains on real estate owned for more than five years. Furthermore, anti-avoidance provisions targeting the use of business assets by shareholders or partners or the use of dummy companies or partnerships do not apply to trusts.
Income tax law provides for a sort of transparency regime for trusts that have 'identified beneficiaries'. The income imputed to the identified beneficiaries qualifies as income from capital and is subject to progressive tax rates if the beneficiaries are individuals. A beneficiary qualifies as an 'identified beneficiary' to the extent that he or she holds a current unconditional right to claim a share of the income generated by the assets held in trust; for example, the whole or a percentage of the income of the trust or the income from certain assets held in trust.
Revocable trusts are disregarded for income tax purposes so that the income from the trust assets is imputed directly to the settlor. Furthermore, the income can be imputed directly to the settlor or the beneficiaries should the overall analysis show that either the settlor or the beneficiaries have a power or de facto control or influence to manage the trust assets or dispose of either the assets held in trust or the income from such assets. In these cases, the income is subject to tax as if it were cashed directly by the settlor or the beneficiaries. In Circular No. 61 of 27 December 2010, the tax authorities provided a non-exhaustive list of examples of disregarded trusts, including trusts that can be terminated by the settlor or the beneficiaries, trusts where the beneficiaries have a right to receive advancement of capital and trusts where the settlor has the power to change the beneficiaries. Also, the power of the settlor to revoke the trustee may be one of the factors leading to the trust being disregarded by the tax authorities.4
Distributions of income to the beneficiaries
The distributions of income are not relevant to income tax to the extent that the trust is either transparent or disregarded.
The tax authorities clarified that distributions of income from resident opaque trusts are not subject to income tax in the hands of the beneficiaries because the income has already been subject to tax at the level of the trust.5
Recent provisions deal with the income tax regime for distributions of income from a non-resident opaque trust to an Italian-resident beneficiary. In particular, Article 13 of the Law Decree No. 124 of 26th October 2019 provides that income distributions from fiscally opaque trusts established in jurisdictions where they benefit from a low tax regime to Italian resident beneficiaries are taxable income in the hands of the recipients. Moreover, in such cases, the mentioned Law Decree introduced a presumption pursuant to which all trust distributions qualify as income distributions, unless it is provided adequate evidence that capital has been distributed. Trusts established in EU and EEA Member States should be excluded from the notion of trusts benefitting from a low tax regime. The definition of low tax regime and the computation of income versus capital is subject to some uncertainties. It is hoped that the tax authorities will provide guidance.
Inheritance and gift tax
Following the 2006 reform of inheritance and gift tax, the tax authorities hold that inheritance and gift tax will be due by the trustee at the time of the addition of the assets to the trust fund and that the applicable rate and the possible exempt amounts are calculated by making reference to the relationship between the settlor and the beneficiaries (it is worth mentioning that this approach has been rejected by the majority of the case law).6 In certain instances, however, favourable inheritance and gift tax rates and exempt amounts may not be effectively benefited from. For instance, in the event of a discretionary trust having a class of beneficiaries with different degrees of family relationship with the settlor, the highest rate will apply as the capital may be wholly distributed to the family member that qualifies for the highest rate. Exemptions from inheritance and gift tax for the transfer of businesses and participations in companies and partnerships to the spouse or descendants may be feasible (see Section II.ii). From an income tax perspective, the transfer of assets from the settlor to the trustee does not trigger the taxation of the latent gains and the tax basis is rolled over to the transferee.
The tax authorities have further stated that distributions to the beneficiaries will not be a taxable event for inheritance and gift tax purposes, as inheritance and gift tax was applied at the time the addition to the trust fund was made.
The regime should be different for trusts created prior to the 2006 reform. Indeed, as confirmed by the Supreme Court (decisions Nos. 25478, 25479 and 25480 of 18 December 2015), to the extent that the addition to the trust fund occurred prior to the 2006 reform of inheritance and gift tax, the distributions to the beneficiaries should be a taxable event, as the addition of assets to the trust fund was not a taxable event prior to the 2006 reform.
ii Life insurance policies
Life insurance policies are widely used thanks to the high flexibility they grant to the policyholder, who can wholly or partly redeem the policy or change the beneficiaries at any time. From an income tax perspective, the income is not taxed until either redemption or death of the insured. In the event of redemption or death, the income is subject to a 26 per cent tax (12.5 per cent to the extent that the income on the underlying capital consists of interest and capital gains on Italian governmental bonds and bonds issued by foreign states providing for exchange of information). The income is equal to the difference between the amount received and the premiums paid (so that the policy allows the full set-off of the underlying income, gains and losses); however, in case of death, the beneficiary is exempt from tax on the portion of the income attributable to the life risk component. Finally, transfer to the beneficiary upon the death of the insured is not mortis causa, because the beneficiary has a direct entitlement to the underlying capital, and, accordingly, is not subject to inheritance tax.
iii Gift with reservation of usufruct
The gift of bare ownership with the reservation of usufruct allows the donor, usufruct holder, to continue to enjoy the use of the asset and the income therefrom for his or her lifetime. To the extent that the asset is a shareholding, the donor may also retain the voting rights. Gift tax is levied on the value of the bare ownership only. Such value is calculated on the basis of percentages provided by tax legislation and based on the age of the usufruct holder. Upon the death of the usufruct holder, the usufruct is extinguished and the bare owner becomes the full owner of the assets, but the consolidation of bare ownership with usufruct does not qualify as a mortis causa transfer under the Italian civil law. Therefore, it does not trigger the levy of inheritance tax.
iv Non-commercial partnership
The resident non-commercial partnership is widely used, particularly to hold real estate; it may be used to avoid the fragmentation of family real estate. Furthermore, the splitting of voting rights from profit participation rights may be achieved. Individuals other than family members may be prevented from acquiring an interest in the partnership and from being involved in the management of the real estate. The resident non-commercial partnership is fiscally transparent. Therefore, the beneficial regimes applicable to real estate held by individuals are preserved (e.g., the exemption from income tax on gains on real estate owned for more than five years). Furthermore, anti-avoidance provisions targeting the use of business assets by shareholders or partners or the use of dummy companies or partnerships do not apply to the resident non-commercial partnership.
Outlook and conclusions
The introduction of the new Italian forfait tax regime for individuals moving to Italy (see Section II.iv) has made Italy one of the most appealing European jurisdictions for high net worth individuals to move to. The regime has gained significant success and specific provisions have been issued to ease the granting of entry visas for non-EU nationals.
The Italian government has not yet implemented the Council Directive (EU) 2018/822 of 25 May 2018 (i.e., DAC 6) which requires certain intermediaries and taxpayers to report, to the competent tax authorities of the EU Member States, information regarding certain cross-border arrangements, to be identified through a list of hallmarks (including CRS avoidance and opaque beneficial ownership structures). For the time being, the Italian government has only issued a draft of the implementing decree.
Furthermore, Italy has not yet implemented the register of the ultimate beneficial owner of corporate entities, private legal entities and trust (UBO register). Such register should be effective after the publication of a Ministerial decree that will establish the terms and conditions for communicating data and information. For the time being, the decree has not yet been issued; however, the Ministry has published a draft of the ministerial decree that should be approved at short notice and, according to the mentioned draft decree, the first mandatory submission of the relevant UBO information to the Italian Chamber of Commerce should be filed by 15 March 2021.
1 Nicola Saccardo is a partner at Maisto e Associati.
2 Trusts whose settlor, beneficiaries and trust property are closely connected with Italy.
3 Circular No. 48 of 6 August 2007.
4 This approach was rejected by the provincial tax court of Novara, judgment No. 73/06/13 deposited on 21 May 2013. More recently, another first-degree local court (Provincial tax court of Varese, Chamber 3, judgment No. 305 of 28 May 2015) rejected the assessment of the tax authorities. In particular, the tax authorities claimed that a trust was to be disregarded on the ground that the protector had significant powers, the protector and the beneficiaries had, by way of a joint decision, the power to remove and appoint the trustee ad nutum, and the trustee was entitled to a limited remuneration. On that occasion, the court held that such elements were not sufficient to disregard the trust.
5 Circular No. 48/2007; Ruling No. 425 of 5 November 2008.
6 In particular, the approach of the tax authorities to levy inheritance and gift tax on the addition to the trust fund has been upheld by the Supreme Court in some decisions, such as No. 3735 of 24 February 2015; No. 3886 of 25 February 2015; No. 3737 of 24 February 2015; No. 5322 of 18 March 2015; No. 4482 of 7 March 2016; and No. 734 of 14 January 2019. In other cases, the Supreme Court seems to have held that inheritance and gift tax should be due upon addition of the assets to the trust unless the trust is a self-declared trust, in which case inheritance and gift tax should be due only upon distribution of the trust assets to the beneficiaries (see judgments No. 21614 of 26 October 2016; and No. 13626 of 30 May 2018). On the other hand, the opposite approach (i.e., a taxable gift arises only upon the distribution to the beneficiaries) has been endorsed by the Supreme Court in other judgments on this topic (see judgments No. 975 of 17 January 2018; No. 1131 of 17 January 2019; No. 15453 of 7 June 2019; No. 16701 of 21 June 2019; No. 19167 of 17 July 2019; No. 22754 of 12 September 2019) and by the ordinance No. 10256 of 29 May 2020. Although the most recent judgments of the Supreme Court seem to endorse the view that, except in certain exceptional circumstances, inheritance and gift tax should be due only upon distribution of the trust assets to the beneficiaries, the Revenue Agency has not reviewed its approach as confirmed by the recent Rulings No. 371 of 10 September 2019 and No. 424 of 24 October 2019.