International Taxation

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With its ruling n. 975 issued on January 18, 2018 Italy’s Supreme Court held that the transfer of an asset (real estate property) to an irrevocable trust falls outside the scope of Italy’s registration, cadastral and mortgage taxes (transfer taxes), charged at the aggregate rate of 10 percent, on the theory that it is a…

With the Budget Law for 2018 (Law n. 205 of December 27, 2017), Italy amended the definition of the term “permanent establishment” set forth in article 162 of the Italian Tax Code.

The term permanent establishment now covers situations in which a foreign enterprise does not have a physical nexus with Italy, but it has…

Pursuant to the Tax Cuts and Jobs Act (“TCJA”) passed on Dec. 22, 2017, the U.S. will tax U.S. corporations with the following tax rates:

– 21 percent general corporate income tax rate,
– 13.125 effective tax rate on U.S. corporation’s foreign derived intangible income (“FDII”), for taxable years from 2018 through 2025;
– 10.5…

Italian international tax law rules provide that Italian tax residents with foreign financial accounts capable of generating foreign source income taxable in Italy, are under the obligation to disclose the information relating to those accounts to the Italian tax authorities. Disclosure is accomplished by filling out a proper section of the Italian personal income tax…

Italian taxation of foreign investments in Italian real estate is complex.

Transfer taxes charged upon the acquisition of the real estate (alternatively, registration tax or VAT) vary depending on the nature and tax status of the buyer (foreign private individual, foreign company purchasing and owning the real estate directly, or foreign individual or corporate investor…

With its Ruling n. 4091 of June 12, 2017, the Eighth Department of Tax Commission (District Tax Court) of Milan, Italy ruled that upon the cancellation of an inter company loan from a Dutch parent company to its Italian subsidiary, the interest accrued on the loan and deducted by the Italian subsidiary on an…

With Circular 17/E of May 23, 2017 Italy’s Tax Agency provided administrative guidance on the interpretation and application of the provisions on the elective preferential tax regime for Italian new-tax resident individuals.

New article 24-bis of Italy’s Unified Income Tax Code, enacted with Law n. 232 of December 2016, provides that foreign-resident individuals who…

Italy enacted a flat tax for first-time residents, which applies in lieu of the ordinary income tax on foreign source income. The flat tax is charged at the fixed amount of euro 100,000. Italian source income remain taxable with the ordinary income tax. First-time residents eligible for the flat tax are exempt from the duty to disclose their non Italian financial and real estate investments and accounts and are not subject to Italy’s estate and gift tax on non Italian assets.…
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With ist ruling n. 27113/2016 issued on December 28, 2016, the Italian Supreme Court interpreted and applied the beneficial ownership provision of article 10 of the tax treaty between Italy and France, for the purpose of determining whether a French holding company, wholly owned by a U.S. corporation, was entitled to the imputed credit granted under that treaty in respect of dividends received from an Italian subsidiary.

The Italian Supreme Court held that the beneficial ownership provision of the Italy-France treaty requires that the recipient of the dividends has full dominion and control over the dividend, meaning, that it enjoys the right to receive and keep dividends, unconstrained by any legal or contractual obligation to pass the dividends on to its parent, and actually enjoys the economic benefit of the dividend, which it treats and reports as its own income on its accounting books and can dispose of without legal or contractual constraints. 

According to the Supreme Court, the fact that the French holding company did not have staff, offices and other significant sources of income, except for the dividends it received from time to time from its subsidiaries, and did not engage in any other activities except for holding the legal title to the shares of its subsidiaries, is consistent with a holding company’s typical functions and role, and does not negate the status of beneficial owner and eligibility to the tax treaty benefits.

The ruling is consistent with a previous decision of the Supreme Court, which we reported in the past on our blog, holding that beneficial owner is the person who has the legal control and economic enjoyment of the dividend (we refer to the Supreme Court’s ruling n. 10792  issued on May 25, 2016).

The interpretation of the term ‘beneficial owner’ as the person having the legal and economic dominion and control over the dividend, followed by the Supreme Court in ruling n. 27113/2016,  is also consistent with the clarification set forth at paragraph 12.4 of the 2014 Commentary to article 10 of the  OECD Model Income Tax Convention, according to which ‘beneficial owner’ is the person who has the full right to use and enjoy the dividend, unconstrained by a contractual or legal obligation to pass on the payment received to another person.

 The Supreme Court expressly rejected the notion that, in order to qualify as a beneficial owner of the dividend, the holding company is required to have a minimum level of organization, including employees and offices, and to engage in business activities generating operating receivables, aside from holding the legal title to the shares of its subsidiaries and receiving dividends therefrom.     

     

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