A recent ruling by the Italian Revenue Agency, no. 175 of July 4, 2025, clarifies both the scope and the effectiveness of the new “immovable-property-rich” look-through rule under Article 23(1-bis) of the “TUIR”, introduced by the 2023 Budget Law. In a case involving a non-resident discretionary opaque trust selling shares of a Swiss company whose sole asset was an Italian residential property held for more than five years, the Italian Revenue Agency rejected the taxpayer’s attempt to extend the five-year capital gains exemption for direct real-estate transfers to an indirect share disposal.
The ruling is aligned with Article 13(4) of the OECD Model Tax Convention, which aims to preserve source-state taxing rights over gains realized on shares deriving most of their value from immovable property located in that state. Under the Italy–U.S. income tax treaty, Italy’s taxation of the gain is permitted.
The case was related to a non-resident, discretionary and opaque trust held 100% of a Swiss company whose only asset—over a period exceeding five years—was a residential property in Italy, not used in business and not classified as inventory. The trust planned to sell the Swiss shares to a third party and contemplated subsequent distributions to Italian-resident beneficiaries.
The taxpayer sought clarification on:
- whether the gain would be Italian-source income under Article 23(1-bis) TUIR;
- whether the five-year exemption for direct real-estate sales under Article 67(1)(b) TUIR could apply by analogy;
- how future distributions to Italian-resident beneficiaries would be treated under Article 47-bis TUIR if the trust were considered to be in a privileged tax regime.
The trust argued that Article 23(1-bis) should be read consistently with Article 67(1)(b), which exempts gains from direct sales of Italian real estate held for more than five years by individuals or foreign entities holding the property as an investment and not through an Italian permanent establishment. It further contended that, if taxable, the gain should be computed as the difference between the sale proceeds and the cost basis of the shares.
The Revenue Agency rejected this interpretation. Article 23(1-bis) TUIR explicitly subjects non-residents to Italian taxation on gains from the sale of shares—Italian or foreign—if, at any time during the preceding 365 days, more than 50% of the entity’s value is derived directly or indirectly from Italian immovable property. The only exclusions concern properties classified as inventory or business-use assets.
Since the Italian property was neither, the gain was taxable in Italy as “reddito diverso” under Article 67(1)(c) and (c-bis), calculated under Article 68(6), and subject to the 26% substitute tax provided by Legislative Decree 461/1997.
Assuming the trust qualifies as a U.S. resident and meets the treaty’s LOB conditions, Italy may tax the gain under Article 13(1), as amended by the Protocol, which treats shares deriving more than half their value from Italian real estate as immovable property. Italy and the U.S. may tax concurrently, with the U.S. granting foreign tax credit relief.
The Agency declined to rule on the taxation of subsequent distributions to Italian beneficiaries. Generally, distributions from non-resident opaque trusts are not taxable unless the trust is located in a privileged tax jurisdiction—defined as one with a nominal tax rate below 50% of Italy’s 24% benchmark.
The taxpayer argued that income already taxed in Italy under Article 23(1-bis) should not be taxed again when distributed, but the Agency did not address this point.
These issues—potentially involving Articles 44, 45, and 47-bis TUIR and Article 4-bis of the inheritance and gift tax code—were excluded as inadmissible due to their relevance to taxpayers other than the applicant and the lack of detailed facts.
Ruling 175/2025 confirms that Article 23(1-bis)’s look-through rule applies as intended, without importing exemptions meant for direct property transfers. The five-year exemption does not protect indirect sales of property-rich entities. Taxpayers must also assess treaty rules—such as the Italy–U.S. provision equating certain shares to immovable property—to understand overlapping taxing rights and foreign tax credit implications.