Breaking News: A Game-Changer for US Businesses Investing in Italy
A recent ruling by the Italian Tax Court of First Instance in Pescara has set a powerful precedent, confirming that US corporations should be taxed at the same preferential 1.2% withholding tax rate as Italian and EU corporations—rather than the higher 5% or even 26% rates many have been forced to pay.
This decision could mean significant tax savings for your business, but the window to claim a refund is limited. Acting now is crucial.
Why This Ruling Matters: Understanding the Case
What Led to the Court’s Decision?
In 2018, a US corporation challenged the Italian dividend withholding tax it paid on dividends received from its 35%-owned Italian subsidiary. While the Italy-US Double Taxation Treaty (DTT) reduced its tax rate from 26% to 5%, the company discovered that Italian and EU businesses only paid an effective tax rate of 1.2% on the same dividends.
This discrepancy violated Article 63 of the Treaty on the Functioning of the European Union (TFEU), which protects the free movement of capital and prohibits discriminatory tax treatment of non-EU investors. When Italian tax authorities failed to respond to the company’s refund request, the case was taken to court—resulting in a groundbreaking decision.
The Court’s Verdict: A Huge Win for US and Non-EU Corporations
The Italian Tax Court ruled in favor of the US corporation, confirming that:
- The company was unfairly taxed at 5% instead of 1.2%.
- Non-EU corporations must be treated the same as EU and Italian businesses under EU law.
- The excess dividend withholding tax must be reimbursed.
This ruling aligns with previous decisions from the Italian Supreme Court and the Court of Justice of the European Union (CJEU), reinforcing the principle that Italy cannot apply discriminatory tax policies against foreign investors.
What This Means for Your Business
For years, US and other non-EU corporations have been overpaying withholding tax on dividends from Italian subsidiaries. With this ruling, businesses now have a legal basis to claim refunds—and recover millions in overpaid taxes.
Who Qualifies for a Refund?
- US corporations that have paid withholding tax on Italian dividends at 5% or 26%.
- Non-EU corporations from countries that have a full exchange-of-information agreement with Italy.
- Companies that received dividends from Italian subsidiaries within the last 48 months.
How Much Could You Reclaim?
Let’s break it down:
- If your company received €1,000,000 in dividends from an Italian subsidiary and paid 5% withholding tax (€50,000) under the Italy-US tax treaty, you should have only paid 1.2% (€12,000) under EU law.
- That means you overpaid by €38,000—which you may now be eligible to recover.
- For businesses with larger investments, this could translate into hundreds of thousands or even millions in tax refunds.
Act Now: How to Claim Your Refund
The window for filing a claim is limited, so it’s essential to act quickly.
Here’s how we can help:
- Assess your eligibility for a refund.
- Handle the entire refund process on your behalf.
- Ensure your claim is filed before the 48-month deadline.
- Maximize your recovery with expert guidance.
Don’t let the tax authorities keep what’s rightfully yours—take action today.