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

 

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.