In a landmark decision, the Italian Supreme Court, in its ruling no. 24387 dated September 11, 2024, addressed the issue of whether a taxpayer can claim the 'first home' tax benefit after transferring a previously purchased property into a trust.
The court concluded that such a taxpayer is not considered 'propertyless' and thus cannot avail the benefit again for a new property purchase.
This decision is particularly noteworthy as it interprets the act of transferring property into a trust as 'fiscally neutral, ' meaning it does not result in a real and stable transfer of wealth or an increase in the trustee's estate.
The trustee merely holds formal ownership, which is eventually passed to the final beneficiary.
This interpretation aligns with the view that contributions to a trust do not demonstrate taxable capacity, as they are instrumental in fulfilling the trust's purpose.
However, applying this reasoning to the 'first home' benefit context seems questionable.
The criteria for this benefit are primarily civil in nature, such as residency requirements and the absence of property ownership in the municipality where the new home is purchased.
While it's true that transferring property into a trust does not increase the trustee's wealth, it does have significant civil law implications.
It involves transferring the legal right from the settlor to the trustee, who must manage it according to the trust's terms.
The court's assertion that the transfer only has a 'segregating' effect, with the trustee acting merely as an administrator, overlooks the civil law impact of such a transfer.
Furthermore, this ruling contradicts the Italian Revenue Agency's circular 34/E/2022, which states that transferring a 'first home' purchased property into a trust within five years of acquisition results in the loss of the benefit.
If the court's view that the settlor cannot claim the benefit for a new purchase is correct, it logically follows that the benefit should not be forfeited when the property is transferred into a trust within five years.

Insights:

The decision highlights the complex interplay between tax law and civil law in the context of trusts.

Trusts are often used for estate planning and asset protection, but their treatment under tax law can vary significantly.
This case underscores the importance of understanding both the fiscal and civil implications of transferring assets into a trust.

Issues:

The ruling raises several critical issues:

1. The inconsistency between the court's decision and existing tax guidelines. 2. The potential civil law implications of transferring property into a trust, which the court may have underestimated. 3. The broader impact on taxpayers who use trusts for legitimate estate planning purposes, potentially limiting their ability to benefit from tax incentives.