Italy: Dividends - Clarification from the tax authorities on the tax regime applicable to foreign pension schemes
LuxCSD informs customers of a recent clarification provided by the Italian Tax Authorities (ITA).
Following a request from a foreign requestor, the ITA has clarified the tax regime applicable to Italian-sourced dividends when paid to a foreign entity having the features of an Italian complementary pension scheme.
The ITA thereby confirmed that a foreign entity cannot benefit from the reduced withholding tax rate of 1.2% if it has the characteristics and investment purposes of a complementary pension scheme and does not carry out a commercial activity in addition to the social security activity.
Therefore, European Union (EU) and European Economic Area (EEA) pension funds similar to Italian complementary pension schemes may only obtain an 11% reduced tax rate on Italian-source dividends.
More information regarding the ITA’s decision is available here. (in Italian)
Impact on customers
Customers claiming the benefit of a reduced rate at source or through a quick or standard refund on behalf of EU/EEA pension funds may continue to do so by submitting the relevant documentation by the prescribed deadline. Please refer to our Market Taxation Guide – Italy for the full applicable procedure.
The One-Time Master Instruction (OTMI) has been amended to reflect this additional information and shall be used for any new certification process. The OTMI is valid until revoked and needs to be replaced only in case of a change in the beneficial owner ‘s data. The former OTMIs already in place remain valid.
Any request for a reduced tax rate of 1.2% shall be automatically rejected if introduced by a pension fund or a complementary pension scheme shall be automatically rejected
Further information
For further information, please contact the Clearstream Banking Tax Help Desk or Clearstream Banking Client Services or your Relationship Officer.