Italy: Spanish funds exempt from withholding tax on dividends from Italian companies; refund opportunity

Italian Supreme Court decision

Italian Supreme Court decision

The Italian Supreme Court on 16 February 2022 held that Spanish investment funds, SICAVs (Société d'investissement à Capital Variable), and pensions funds are all entitled to a refund of withholding tax levied on dividends paid by Italian companies.

The Supreme Court held all European companies or entities subject to tax for corporate tax purposes can benefit from the reduced withholding tax rate, including those that do not pay taxes by virtue of certain exemptions linked to the type of income they produce, or to the place in which their activity is conducted. Therefore, any entity established within the EU that is considered as a taxable person for corporate income tax purposes, is entitled to the application of the Italian tax rate on dividends. This rate was 1.375% (for the years 2008-2016) and 1.2% (from 2017 onwards), instead of the 27% withholding tax rate or the 15% rate applicable under income tax treaties. To be eligible, certain requirements must be satisfied, including the tax residence of the entity in an EU Member State and the liability to corporate income tax in that country. The legal form of the entity is not relevant.

KPMG observation

This is the first positive high court decision in favor of foreign investment funds in Italy and is line with previous favorable rulings and consistent with case law of the Court of Justice of the European Union (CJEU). Read TaxNewsFlash

Foreign investment funds, SICAVs, and pension funds that are tax resident in an EU member state and subject to corporate income tax therein may want to consider filing withholding tax refund claims in Italy and initiating court proceedings.

Withholding tax refund claims may be lost if no court proceedings are initiated within 10 years after the filing of the refund claim

Read a February 2022 report [PDF 243 KB] prepared by the KPMG member firm in Italy


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