close
Share with your friends

Italy: Draft budget law proposes to repeal withholding tax on dividends distributed to EU/EEA investment funds

Italy: Dividends distributed to EU/EEA investment funds

The draft budget law 2021 includes a proposal that may prove favorable for foreign funds investing in shares of Italian resident companies. The proposal is aimed at repealing the discriminatory tax treatment of dividends distributed to foreign investment funds and also of capital gains realized by these funds.

1000

Related content

Under Italy’s current tax measures, if Italian investment funds (or their management companies) are subject to prudential supervision, they are not subject to tax—whereas foreign investment funds are subject to withholding tax at a rate of 26%.

The draft provision in the budget law 2021 would revise this treatment, so that dividends distributed by Italian companies to eligible foreign funds and capital gains realized from the disposal of Italian qualifying equities (as defined) would not be subject to tax in Italy. This favorable tax treatment would only apply with regard to foreign collective investment undertakings established in an EU or EEA Member State that allows for an adequate exchange of information for tax purposes, to the extent that: (1) they comply with Directive 2009/65/EC (the UCITS Directive); or (2) if they do not comply with the UCITS Directive, they are managed by an alternative investment fund manager (AIFM) subject to regulatory supervision in the country where it is established in accordance with Directive 2011/61/EU (the AIFM Directive). 

Effective date

If the proposal is enacted, the new measure would be effective for dividends distributed and capital gains realized from 1 January 2021. 

KPMG observation

A report accompanying the proposal explains that the purpose of the new measure is to address differences between the tax treatment of domestic collective investment undertakings and that for foreign entities. Foreign collective investment undertakings, therefore, may want to consider filing protective refund claims for the years up to 2020 or to submit “refresher letters” for which the statutory limitations period (10 years from the filing date of the claim) will expire by 31 December 2020.


Read a November 2020 report [PDF 147 KB] prepared by the KPMG member firm in Italy

The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us

 

Want to do business with KPMG?

 

loading image Request for proposal