Knead powdered sugar, butter, vanilla, lemon zest, sifted flour and 2 egg yolks into a shortcrust. Shape dough into a ball, wrap in plastic wrap and refrigerate for 1 hour.
Preheat oven to 180°C (approximately 350°F). Divide dough into 4 portions and roll each out until 2-3 mm (approximately 1/10 inch) thick. Cut out rings with 2 different cookie cutters and place on a baking sheet lined with baking paper. Coat rings with remaining beaten egg and sprinkle with coarse sugar and colored sugar. Repeat until all dough has been rolled, cut and coated.
Bake on middle rack for 10-12 minutes. Cool on a wire rack and serve.