Article by Leonardo Arienti, Italian Solicitor
Published in Wealth Planning, Modulo 24, Il Sole 24 Ore, February 2025
Article available at: https://modulo24wealthplanning.ilsole24ore.com/private/default.aspx?iddoc=43131295#showdoc/43131295/?ref=approfondimenti
Abstract:
The fiduciary registration of real estate assets with a Società Fiduciaria (i.e. Italian fiduciary company) operating under Italina Law No. 1966/1939 results in the transfer of only formal ownership to the fiduciary entity, while substantive ownership remains with the settlor. Although no actual transfer of property or wealth occurs between the settlor and the fiduciary company, the Italian Revenue Agency still considers this contractual arrangement as fiscally relevant for indirect taxation purposes. However, this position appears to be outdated in light of the interpretative evolution that has characterized the trust institution in recent years.
Introduction: Fiduciary Arrangements and Fiduciary Agreements
The concept of “fiducia” (Italian trust), as a legal institution, plays a crucial role in Italian law.
Originating in Roman times as a means to transfer property or rights between two individuals based on a personal and fiduciary relationship (the so-called “fiducia cum amico”), this institution has undergone continuous evolution.
Despite the practical significance of various fiduciary arrangements, they have yet to be comprehensively regulated within the Italian Civil Code. Paradoxically, the absence of a codified framework has allowed for greater flexibility in their application, leading to the development of a broad and diverse set of legal instruments related to fiduciary relationships.
Over recent years, academic doctrine and case law have contributed to a greater awareness and stabilization of fiduciary agreements, clarifying their defining characteristics and legal boundaries. Among these institutions are the trust, the fiduciary assignment agreement, the fiduciary mandate, and the fiduciary mandate with a fiduciary company — all of which rely on the central element of fiduciary trust that underpins the underlying legal relationship.
The following sections will delve into the fiduciary mandate with a fiduciary company, a unique instrument within the Italian legal system that, although not widely known, is extensively used in practice. This institution is undergoing a continuous process of evolution that will likely lead to its future formal regulation within the Italian Civil Code.
Following an initial analysis of the civil and tax aspects of the fiduciary mandate with a fiduciary company, we will explore its potential application in the fiduciary administration of real estate assets. In doing so, we will draw a parallel with the significant interpretative, jurisprudential, and regulatory developments that, in recent years, have influenced another key fiduciary arrangement: the trust.
Fiduciary Registration of Assets with a Fiduciary Company
The so-called “fiduciary mandate” represents the standard contractual arrangement used by fiduciary companies that are institutionally authorized to engage in “asset management on behalf of third parties” under Law No. 1966 of November 23, 1939. This activity is exclusively reserved for fiduciary companies under Italian law.
Belonging to the category of fiduciary agreements, the fiduciary mandate with a fiduciary company—also referred to as fiduciary administration mandate or fiduciary registration mandate—differs from a generic fiduciary mandate by not involving the actual transfer of ownership rights. In contrast, a fiduciary mandate without a fiduciary company (i.e., between two private individuals) results in an actual transfer of ownership from the settlor to the fiduciary.
In the fiduciary mandate with a fiduciary company, the settlor transfers an asset to the fiduciary company for administration purposes with legal registration. However, the settlor does not transfer ownership rights to the fiduciary company but only the formal title. As a result, the fiduciary company appears as the registered owner of the asset before third parties, while substantive ownership remains with the settlor. This fiduciary arrangement, exclusive to fiduciary companies, allows for the dissociation of ownership rights between “formal ownership”, which is assigned to the fiduciary company, and “substantive ownership”, which remains with the settlor. This is in line with the so-called “Germanic fiduciary model.”
Consequently, the fiduciary company acts as a mere nominee titleholder of the asset. As a result, all assets managed under fiduciary arrangements do not constitute part of the fiduciary company’s estate.
The legal implications of this contractual relationship are numerous.
For example, consider the fiduciary transfer of an asset by a settlor who later passes away:
- In a fiduciary arrangement without a fiduciary company: Ownership rights are effectively transferred from the settlor to the fiduciary. Upon the settlor’s death, the asset becomes part of the fiduciary’s estate and is not included in the settlor’s inheritance.
- In a fiduciary arrangement with a fiduciary company: No actual ownership transfer occurs, meaning the asset remains part of the settlor’s inheritance and is included in their estate upon death.
Although fiduciary mandates with fiduciary companies have existed in the Italian legal framework for over eighty years, their legal classification has undergone significant evolution. Only recently, through contributions from legal scholarship, Supreme Court rulings, and guidance from the Ministry of Enterprises and Made in Italy (MIMIT), has a definitive legal framework emerged.
Taxation of Fiduciary Registration of Assets with a Fiduciary Company
Since a fiduciary mandate with a fiduciary company does not result in the transfer of ownership and allows the settlor to retain full disposal rights over the asset, this contractual structure has significant tax implications.
Direct Taxes
From a direct tax perspective, the settlor’s substantive ownership takes precedence over the fiduciary company’s formal title. Consequently, the fiduciary company is considered fiscally transparent, meaning that the settlor remains the taxpayer and retains all relevant tax liabilities related to the asset.
Indirect Taxes
Regarding indirect taxation, Italy does not have a specific legal framework governing fiduciary mandates with fiduciary companies, unlike the trust, which has seen extensive regulatory development.
The Italian Revenue Agency has historically viewed fiduciary registration of real estate as a taxable event for inheritance and gift tax purposes, as well as proportional mortgage and cadastral taxes. However, this stance appears outdated, particularly in light of the more recent favorable tax treatment of trusts.
Conclusion
The fiduciary mandate with a fiduciary company serves as a valuable instrument for confidentiality, professional asset management, and estate planning, all while ensuring that ownership rights remain with the settlor.
A key characteristic of this arrangement is the separation of ownership rights, whereby the fiduciary company holds formal title, while substantive ownership remains with the settlor, following the Germanic fiduciary model.
Unlike trusts, fiduciary mandates with fiduciary companies have not undergone significant interpretative and regulatory evolution in recent years. This is particularly evident in the tax treatment of real estate transfers, where trusts have been deemed fiscally neutral due to the absence of real wealth transfers, whereas fiduciary mandates with fiduciary companies continue to be subject to outdated taxation policies.
Given that no actual ownership transfer occurs in fiduciary mandates with fiduciary companies, the same fiscal neutrality principle applied to trusts should logically extend to these arrangements.
