According to the 2021 Draft Finance Law (La bozza di DdL Bilancio 2021), with regard to the taxation of dividends and capital gains deriving from shareholdings of companies with tax residence in Italy, the current discrimination between investment funds established in Italy and established abroad will cease.
In particular, foreign UCITs and AIFs will benefit from full Italian tax-exemption on dividends received from and capital gains realised on their Italian shareholding.
The current Italian domestic rules provide for the exemption from corporate income tax only for dividends and capital gains received by investment funds established in Italy, while those received by foreign investment funds are subject to a withholding tax of 26%.
The exemption will apply to dividends received by foreign investment funds in accordance with Directive 2009/65/EC (UCITS IV Directive) or those whose management company is subject to forms of supervision in the country of establishment in accordance with Directive 2011/61/EU (AIFM Directive), if established in an EU/EEA State allowing an adequate exchange of information with Italy. The exemption will also apply to capital gains (and losses) realised through the sale of qualified shareholdings of companies resident in Italy, similarly to what is already provided for by other provisions for non-qualified shareholdings.
As clarified in the explanatory report, the amendment is aimed at overcoming the existing differences by equating the tax treatment applicable to dividends and capital gains earned by EU/EEA investment funds to the one currently granted to Italian investment funds.
The draft Finance Act 2021 specifies that the amendment will be applicable as from the date of approval of the law. In any case, this will certainly have positive effects on administrative or judicial proceedings already initiated or to be initiated on the basis of the EU law jurisprudence (cases Aberdeen, Santander, Deka) and aimed at obtaining the reimbursement of withholding taxes levied in past years. This amendment is a very good news from Italy for foreign investment funds in particular for those who have filed protective claims on a regular basis.
Currently, Italian Tax Authorities reject tacitly a tax reclaim 3 months after the filing of such claim. Then, the applicant has 10 years to lodge an appeal. Statute of limitation is 4 years from the dividend payment date.
Globe Refund strongly recommends to continue to file protective claims and that you get in touch with your custodian for an exemption on your future income from Italy.
Globe Refund is regularly filing claims in Italy on behalf of its clients. We will be delighted to assist you. Feel free to contact us.