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Italy: Withholding tax exemption, foreign investments in Italian real estate

Withholding tax exemption in Italy

The Italian tax authority (Agenzia delle Entrate) issued a tax ruling in response to certain foreign investment funds seeking to qualify for an exemption from withholding tax.


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The tax ruling—Risoluzione n. 78/2017 (27 June 2017)—may make it easier for foreign investment funds to show they qualify for an exemption from withholding tax. 


Proceeds from an investment in an Italian real estate investment fund (REIF) are exempt from withholding tax (imposed at a general rate of 26%) if the beneficial owner is, for example, an investment fund—such as a collective investment vehicle (CIV)—that is established in a country that has an adequate exchange of information process and is listed in an Italian decree (1996).

Moreover, to benefit from the withholding tax exemption measures:

  • The foreign CIV must—according to the laws of the country where it is established—satisfy the same substantial requirements and have the same investment purpose as an Italian CIV (e.g., plurality of investors and independence of the management company from the investors).
  • The foreign CIV (or its management company) must be subject to supervision.

To satisfy the “subject to supervision” criterion, a copy of the letter of authorization on establishing the fund, stating the law (e.g., the UCITS IV EU Directive) that requires such supervision, is sufficient. Thus, a copy of the letter is to be provided to the management company or depository bank holding the REIF's units.

In the 2017 tax ruling, a CIV established in the Cayman Islands (now listed among the countries allowing for an exchange of information) was planning to acquire a majority of units from an Italian REIF, managed by an Italian management company. 

  • The Cayman CIV has the legal form of a limited liability partnership, with a general partner that acts as its manager. 
  • The rest of the REIF units would be acquired by other foreign CIVs, managed by a company established in Delaware (United States) and acting as an “investment adviser” subject to supervision of the U.S. Securities and Exchange Commission (SEC).
  • The Delaware company (the investment adviser) and the relying adviser (the general partner of the Cayman CIV) are registered with the SEC.

The Cayman CIV asked the Italian tax authority—concerning the withholding tax exemption—whether the SEC registration of its general partner would be sufficient proof that it was “subject to supervision” and how could such SEC registration be demonstrated.

Tax agency’s ruling

The tax agency found that the general partner of the Cayman CIV and the investment adviser were “subject to supervision” for purposes of the withholding tax exemption because they were registered with the SEC. Further, the Cayman CIV could satisfy the requirement by providing a copy of the SEC form (i.e., the ADV form) to the Italian management company. 

Thus, the ruling clarifies that in cases when the supervisory authorities of a foreign state do not issue a specific attestation, the "subject to supervision" requirement is satisfied if supervision can be inferred from public sources.


Read a July 2017 report [PDF 168 KB] prepared by the KPMG member firm in Italy

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