Italy: Luxembourg fund exempt from withholding tax on Italian dividends; refund opportunities (court decision)

A court decision concerning Luxembourg refund opportunities from withholding tax imposed on Italian dividends

Luxembourg fund exempt from withholding tax on Italian dividends

The Italian provincial tax court of Pescara on 7 February 2022 held that a Luxembourg UCITS (Undertakings for Collective Investment in Transferable Securities) in the form of a SICAV (Société d'investissement à Capital Variable) is entitled to a full refund of the withholding tax imposed on dividends distributed by Italian companies.

KPMG observation

This is the first decision to award a SICAV in Italy a full withholding tax refund based on previous judgments of the Court of Justice of the European Union (CJEU). Read TaxNewsFlash

In addition, the Italian Supreme Court issued two favorable decisions on 16 February 2022 in relation to the refund of withholding tax paid on Italians dividends by Spanish investment funds, SICAVs and pension funds. Read TaxNewsFlash

Tax practitioners believe these decisions could pave the way for definitive recognition that foreign UCITS entities (investment funds or SICAVs) that have invested in Italy are entitled to refunds.

As a result, UCITS entities need to consider filing withholding tax refund claims in Italy and initiate court proceedings if the Italian Revenue Agency (Agenzia delle Entrate) does not reply within 90 days of the filing date of the refund claim (which means that the claim has been tacitly denied).

Typically, the Italian Revenue Agency does not reply to withholding tax refund claims; therefore, the only way forward to obtain the refund would be to file an appeal.

An appeal must be filed within 10 years plus 90 days of the initial filing date of the withholding tax refund claim.

Read a February 2022 report [PDF 239 KB] prepared by the KPMG member firm in Italy

 

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