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.
Continue Reading Circular 26/E of May 21, 2009 Provides Guidance on EU Dividends Withholding Tax

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.
Continue Reading Italian Supreme Court Rules on Application of Tax Treaty Benefits to Partnerships

The European Curt of Justice ruled that the parent subsidiary directive, which exempts from withholding tax dividends paid from a EU subsidiary to a EU parent, does not apply to dividends paid to the holder of a usufruct right on the shares.
Continue Reading EU Parent-Subsidiary Directive Does Not Apply to Dividends on Shares Held in Usufruct, ECJ Ruled

With two very important decisions issued on December 23, 2008 and concerning a dividend washing and dividend stripping transaction, the Italian Supreme Court for the first time applied a general anti-avoidance principle deriving directly from the Italian Constitution. According to the Court, the general anti-avoidance principle is an underlying principle of the Italian tax system that applies on top and above of any other specific anti abuse provision of the tax code, and denies the tax benefits of a transaction that lacks economic substance and is entered into for the sole or principal purpose of obtaining a tax advantage.
Continue Reading Italian Supreme Court Applies General Anti-Avoidance Principle