U.S.-Italy Tax Treaty

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Italy’s New Look-Through Rule Hits Trust’s Share Sale

In Ruling No. 175/2025, the Italian Revenue Agency confirmed that the “immovable-property-rich” look-through rule under Article 23(1-bis) TUIR—introduced in the 2023 budget law—applies in full force to indirect share sales. A non-resident discretionary trust sold shares of a Swiss company whose only asset was an Italian residential property held for over five years. The Agency rejected the taxpayer’s attempt to apply the five-year capital gain exemption for direct property sales, holding that the gain was taxable in Italy at 26%.

The decision aligns with OECD Model Article 13(4) and the Italy–U.S. treaty’s property-rich share rule, confirming Italy’s right to tax such gains regardless of holding period. For planners, the message is clear: exemptions for direct real estate sales don’t carry over to indirect disposals, and treaty coordination will be key to managing double taxation risks.…

On September 1, 2022, the Italian Supreme Court issued a ruling (n. 25698) in a case concerning a distribution from a U.S. partnership treated as a taxable dividend in Italy. The dividend was taxed by way of a substituted tax, and Italian tax law did not allow a credit for the income tax paid the…

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.…