Italy issued circular n. 26/E of May 21, 2009 which provides clarifications on the new EU dividend withholding tax. The reduced tax rate of 1.375 percent applies to dividends paid to companies that are resident in an EU member state and are subject to corporate tax in their own state of residence, even though they do not pay any tax on their income due to an exemption or other particular tax regime that applies in that state.
2009
Italian Supreme Court Held That Burden of Proof in Tax Avoidance Cases is Upon Taxpayers
Italian Supreme Court in judgment n. 8487 of April 8, 2009 placed upon taxpayers the burden to prove the existence of valid economic reasons to avoid the application of anti abuse provision and denial of tax benefits in tax avoidance transactions. The decision contradicts a previous ruling, n. 1465 issued on January 21, 2009 in which the burden of proof was placed upon the tax administration.…
New Law Targets Tax Abuse of Repos, Securities Lending Transactions
New law targets the use of sale and repurchase agreements and securities lending transactions for tax advantages. According to the new law, the repo buyer or borrower in a securities lending transaction is eligible for tax benefits such as credits for withholding taxes or foreign taxes or participation exemption for dividends on stock, only if and to the extent those benefits could be attributed to the repo seller or securities lender. The new provision is aimed at stopping transaction such as dividend washing or dividend stripping, in which the a holder of securities who would not be eligible for certain tax benefits, transfer those securities to an accommodating party, who collects the benefits, in exchange for an equivalent economic consideration.…
Italian Government Is Preparing a New Tax Amnesty
The Italian government is working at a bill which would enact a new tax amnesty. The bill should be introduced to the Parliament as early as next week.
Based on certain anticipations on the contents of the new bill, undeclared foreign earnings that are reported and repatriated would be subject to 10% flat tax. Unreported…
Tax Administration Rules on Taxation of Foreign Stock Options
In ruling n. 92/E of April 2, 2009 Italy’s tax administration ruled that stock received through the exercise of stock options granted by a foreign company is income taxable in Italy, if the options are exercised after the taxpayer has moved to Italy and become a resident of Italy for tax purposes, even though the…
Italy Authorized the Ratification of the New U.S.-Italy Tax Treaty
Italy authorized the ratification of the new U.S.-Italy tax treaty (the “1999 Treaty”), together with a protocol and memorandum of understanding.
The 1999 Treaty shall enter into force on the date on which the instruments of ratification are exchanged and shall apply to taxable periods beginning on or after the first day of the following year.
However, for withholding taxes, the 1999 Treaty shall apply to payments made or accrued on or after the first day of the second month following its entry into force.
The 1999 Treaty contains several new important provisions, including provisions on limitation on benefits, arbitration, branch profits tax, reduced withholding rates, creditability of the Italian regional tax on production activities, and application of treaty benefits to partnerships.…
Italian Supreme Court Rules on Application of Tax Treaty Benefits to Partnerships
Italian Supreme Court denied treaty benefits to dividends paid to a US limited partnership. US LP did not qualify for treaty benefits under the US-Italy treaty since fiscally transparent in the US. A Japanese fund member of the US LP failed to qualify for treaty benefits under the Italy-Japan treaty since it was not the legal recipient of the dividend.…
Italian Tax Administration Clarified Tax Treatment of Debt Obligations Issued by Italian SRL’s
Italy’s Tax Administration in ruling 54 of March 3, 2009 clarified that debt instruments issued by Italian limited liability companies (SRLs) can qualify as debt obligations for tax purposes, and interest paid thereunder can be eligible for the exemption from Italian tax (portfolio interest exemption) fore foreign investors, if the instrument is not part of a permanent establishment of the foreign investor in Italy and the foreign investor otherwise qualifies for the exemption by reasons of being resident or domiciled in an approved jurisdiction (white-listed country).…
Favorable Tax Treatment for Special Investment Funds Denied, EU Trial Court Ruled
The reduced tax applicable to special investments funds was held illegal by the EU Court of First Instance in judgments issued on March 4, 2009.…
Deduction of Tax-Haven Costs Requires Proof of Specific Economic Interest
Deduction of costs arising from transactions with entities domiciled in low-tax jurisdictions requires proof of specific economic interest.…