Foreign Trusts: Dividends or Capital Gains? The Italian Tax Authority Clarifies the Fiscal Boundaries in Ruling No. 144/2025

With its recent Ruling No. 144/2025, the Italian Tax Authority addressed the tax treatment of a Maltese trust, specifically concerning the taxation of dividends and capital gains from holdings in Italian companies.

In particular, the Authority denied the application of the reduced 1.20% withholding tax rate provided under Article 27, paragraph 3-ter, of Presidential Decree No. 600/1973 on dividends paid to foreign entities, on the grounds that the trust – although fiscally treated as a company in Malta – does not possess the corporate legal form required under Italian law.

Conversely, the same trust was granted exemption from taxation on capital gains (pursuant to Article 5, paragraph 5, of Legislative Decree No. 461/1997), as it is a tax resident in a white-listed jurisdiction and qualifies as a taxable entity.

This clarification by the Tax Authority highlights a significant distinction between the taxation of recurring income flows and that of capital gains, with notable implications for international tax planning.

In light of these considerations, it may be more tax-efficient to pursue a strategy based on capitalisation and disposal of shares, rather than immediate distribution of dividends.

This case underlines the importance of conducting a thorough preliminary analysis, attentive to legal nuances and cross-border tax coordination.

Our professionals remain available for further clarification.