The case
The two decisions (which are identical but referring to different tax years) involve
In order to avoid the double taxation of the dividends in
Despite having granted a partial reimbursement (in relation to the tax years 1995-1997), in 2010 the Italian tax authorities changed their position, claiming that the trustee of a trust cannot be considered to be a 'person' as described in the tax convention provisions. This was based on the assumption that there are no regulations in Italian law regarding the role of trustees and, consequently, the concepts of 'residence' and 'beneficial owner' could not be applied to them.
The decisions of the Supreme Court
The
- article 3, paragraph 1 of the
Italy -UK double tax convention lists general definitions which should be applied to the other provisions of the convention "unless the context otherwise requires". This allows the treaty states to interpret the general definitions according to the nature of the agreement between them, the development of their legal systems and their economic framework;
-
Although the
OECD Model Tax Convention on Income and on Capital does not provide a definition of 'trust', scholars have demonstrated that an extensive interpretation of the definition of 'person' in article 3 includes trusts;
- the definitions in article 3 are only general and non-exhaustive. The Convention can therefore be interpreted in line with new economic and juridical entities/subject that have developed over the years, and that should fall within the definition of 'person';
-
a trust is a juridical instrument fully recognized in
Italy following the 1992 ratification of theHague Convention (1985) and fully regulated for tax purposes since 2007.
In light of the above, the Supreme Court confirmed that trusts are officially recognized by the Italian legal system and the articles of the
The conditions for the application of the conventions
Finally, the Supreme Court has also accepted that the structure of a trust is not always the same (frequently varying depending on the country in which it is settled) and, thus, a case-by-case analysis is always required. In order for trusts to benefit from the tax treaty provisions, it is therefore necessary to provide evidence of the trust structure, a description of the powers of the trustees and the presence of identified beneficiaries that enables the identification of the Ultimate Beneficial Owner(s) of the dividends.
The
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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