Can San Marino’s progressive legal approach become the new standard?
Nestled in northern Italy, the Republic of San Marino stands as a landlocked microstate, counted among the world’s oldest republics. Sharing a similar population size to Monaco, this unique nation encompasses an area sixty times larger, spanning 61 km2 or 24 square miles, smaller than Disneyworld. The official language of San Marino is standard Italian, with approximately 83% of the population also fluent in the unique Sammarinese dialect.
In terms of its functioning, the Republic uses the euro and its own currency, the San Marino shield, which holds legal tender status solely within its national borders. Solidifying its presence on the global stage, the Republic joined the United Nations in 1992.
Over time, San Marino has emerged as a key European hub with its competitive tax regime and its robust trust law system.
Evolution of San Marino from Mount Titano to Sovereign Statehood
The origins of the country can be traced back to the early 4th century when a Christian stonemason named Marinus established a small community on top of Mount Titano, which is now the historic center of the microstate. Marinus and his followers sought refuge from religious persecution, and their settlement gradually grew into the independent Republic of San Marino.
The country has a remarkable history of remaining independent through centuries of challenges. It adopted its first constitution in 1600, solidifying its status as a sovereign republic. Despite its geographic proximity to Italy and the periods of political upheaval in the region, San Marino successfully preserved its independence.
Navigating San Marino’s Taxation
The tax system of San Marino caters to both corporate entities and individual taxpayers. The regularly applied corporate tax rate is 17% of net revenues. However, the jurisdiction has introduced a series of tax and financial incentives to promote a business-friendly environment. Tax residency for legal entities is determined by the registered office or place of effective management being in San Marino for most of the year.
| Description | Corporate Tax Rates |
| New businesses can qualify for a reduced corporate tax rate for the first 5 years. | 8.5% |
| Standard corporate tax rate applicable to companies that do not qualify for the reduced rate. | 17% |
A 5% withholding tax applies to revenues distributed directly to natural persons. This withholding tax can be deductible using double tax treaties. To this day, San Marino has treaties with 26 countries, including the United Kingdom.
San Marino Personal Income Tax Structure
The Republic applies progressive tax rates. The following are applicable to to natural persons considered residents of San Marino.
| Income Brackets | Income Tax Rates |
| Up to €10,000 | 9% |
| €10,000 to €18,000 | 13% |
| €18,000 to €28,000 | 17% |
| €28,000 to €38,000 | 21% |
| €38,000 to €50,000 | 25% |
| €50,000 to €65,000 | 28% |
| €65,000 to €80,000 | 31% |
| Above €80,000 | 35% |
San Marino’s Unconventional Trust Approach
Despite its close proximity to Italy, the approach to trust law in the microstate is rather different. Trust law in Italy is particularly more accommodating than other neighboring civil law jurisdictions: In the absence of specific legislation governing trusts, Italy still recognizes and grants legal validity to trusts established under non-Italian law through its endorsement of the Hague Convention on Trusts. A Presidential Decree still mandates that trusts be filed and registered in the Register of Enterprises, removing the option for anonymity when setting up a trust.
Hague Trust Convention of 1985 Signatories
| Australia | Canada | China | Cyprus |
| France | Italy | Liechtenstein | Luxembourg |
| Malta | Monaco | Netherlands | Panama |
| San Marino | Switzerland | United Kingdom | United States |
In addition to also being a signatory of the Hague Trust Convention of 1985, San Marino has taken further steps by establishing the Court for the Trusts and Fiduciary Relations. This specialized court oversees a wide range of cases and disputes related to trust law and fiduciary relationship. Its authority encompasses various matters, including trusts, fiduciary agreements, fideicommissum, fiduciary heirship, and similar institutions governed by any legal system.
The Court, established under the 2012 constitutional trust law, is made up of five judges and one president, each serving a five-year term. These judges are highly respected Italian lawyers and academics, chosen for their expertise in the field, including relevant experience within common law systems. This well-designed trust framework follows international standards, incorporates English trust terminology, and allows for various types of trusts, including inter vivos, testamentary, irrevocable, and revocable trusts. Trust registration is mandatory in this system.
The current San Marino trust law is downloadable from the Court’s official website.
San Marino Adapting to Stay Competitive
Despite its small size, San Marino has successfully preserved its sovereignty and cultural identity for centuries. Beyond developing its own legal system, it has created a unique approach to trust law that sets it apart from neighboring Italy and other civil law countries.
Looking ahead, the Government of San Marino has taken a proactive approach by assembling a team of experts to draft new legislation for private foundations, expanding its focus beyond just trust law. As this microstate continues to evolve, it remains a forward-thinking jurisdiction in Europe and in the world of trust law.
You can learn more about this nation via the official government website, and its history by reading the The Republic of San Marino by William Miller.
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Cover Image: Flag of San Marino (2011), Commons
Originally published in June 2023
