Standard refund - eligibility, documentation, deadlines - Italian debt securities
Who can apply for a standard refund?
A standard refund of withholding tax on interest from Italian debt securities is available through LuxCSD for beneficial owners as follows:
| Eligible beneficial owners | Effective rate of tax after refund | Tax refund available a |
| Residents of a White List country b | 0% | 26% c / 12.5% d |
Central banks or other entities that manage state reserves | 0% | 26% c / 12.5% d |
Supranational organisations recognised by Italian law | 0% | 26% c / 12.5% d |
a. Expressed as a percentage of the gross interest amount.
b. According to the requirements of the respective DTT.
c. As of 1 July 2014, on all corporate bonds regardless of maturity. The rate between 1 January 2012 and 30 June 2014 was 20%.
d. Up to 31 December 2011, on bonds subject to Legislative Decree 239/2003 and taxed at source at 12.5% and, as of 1 January 2012, on Italian government bonds or public debt equivalent (municipal bonds, provincial bonds, bonds issued by officially recognised organisations (for example, BEI, BIRS etc.)).
Important note:
Customers are reminded that all standard refund applications depend on the final approval of the Italian Tax Authorities.
Furthermore, customers should be aware that the Italian Tax Authorities' requirements and interpretation of the applicable laws may be subject to changes. In order to safeguard the interests of our customers and to avoid rejections of withholding tax reclaims, customers are strongly recommended to certify their accounts for tax exemption at source and to avoid the standard refund applications. LuxCSD cannot accept responsibility for the acceptance or non-acceptance of tax reclaims by the Italian Tax Authorities.
Documentation requirements
Circular 20/2003 has specified that tax reclaims can be issued for the total amount of Italian withholding tax without taking into account the relevant DTT rate. Non-Italian residents of all countries that are eligible for exemption at source, as introduced by Legislative Decree 239/1996, as amended, are eligible for a full tax refund. The Italian Tax Authorities are expected to issue a new tax reclaim form but, for the interim period, LuxCSD advises its customers to complete the relevant forms with reference to the relevant DTT but indicating the full refund amount of the refund in columns 16 and 18.
Note: For reclaiming withholding tax on interest payments, customers should not include a Letter of Request for Reclaim to LuxCSD in the documentation requirements listed below. However, in the Cover Letter, they must clearly indicate their LuxCSD account number and confirm their request that LuxCSD forward the respective reclaim application to the Italian Tax Authorities.
Documentation requirements vary according to the type of beneficial owner, as follows:
- For residents of a White List country, the European Central Bank (ECB), a central bank member of the European System of Central Banks (ESCB), another central bank or an entity that manage state reserves:
- Modulario 111;
- Power of Attorney from Final Beneficial Owner to LuxCSD.
- For supranational organisations recognised by the Italian law:
- Claim for the refund, exemption or application of the reduced tax rate on income paid to non-residents.
- Any additional document allowing the ITA to verify the status of Supranational organisation.
- Power of Attorney from Final Beneficial Owner to LuxCSD.
Form descriptions are presented according to the procedures available for relief and/or reclaim of withholding tax on income from Italian debt securities.
Proactive Tax Reclaim Service for Italian debt securities
LuxCSD offers an enhanced service for completing applications for refunds of Italian withholding tax on interest payments from government debt securities by means of reclaim form Modulario 111. The improvements of this service are as follows:
- LuxCSD will provide additional assistance to customers in completing a set of Modulario 111.
- The time between the initial request for the service and the submission of the Modulario 111 by LuxCSD to the Italian Tax Authorities is reduced.
Description of the process
Customers initiate the process by sending a message via an authenticated means of communication or an original letter to the following address:
Clearstream Operations Prague s.r.o.
Attn: OTR - Tax Reclaim Services
Futurama Business Park Building B
Sokolovska 662/136b
18600 Prague 8
Czech Republic
with the following information for each reclaim application for which a separate set of Modulario 111 must be completed:
- The customer’s account number with LuxCSD;
- The name and full address of the beneficial owner (clearly indicating the country of residence) and the name and full address of the beneficial owner's legal representative, if any;
- The name, contact details and address of the person in the customer's organisation to whom the Modulario 111 should be returned.
and, for each event for which a refund is being reclaimed:
- Either the ISIN code, the common code or the ABI code;
- The date of deposit and date of withdrawal of the nominal value of the security with LuxCSD;
- Nominal value of the security on which the reclaim is based;
- The applicable coupon date for the reclaim application.
Completion of original certificates
Upon receipt of the above information, LuxCSD will produce four draft sets of the Modulario 111 and send them to the customer for checking and confirmation that all details are correct. A set of the Modulario 111 is required for each of the following:
- The Italian Tax Authorities;
- LuxCSD;
- The customers;
- The final beneficiary's tax authorities.
Each of the above sets will be addressed to the attention of the person identified in the original request from the customer.
Customers agreement
The four sets of the Modulario 111 will be sent to the LuxCSD customer to obtain agreement on the details included in the forms and to have all copies signed by all relevant parties.
Upon receipt of the four sets, the customer will do the following:
- Have part I of all four Modulario 111 signed by the final beneficial owner. Where the LuxCSD customer is also the final beneficial owner, the customer should sign them as the beneficial owner. If the final beneficial owner is a legal entity, the stamp of the company must be next to the signature. Electronic signatures are not accepted.
- Ensure that the beneficial owner submits all four Modulario 111 to its tax authorities in order to have part V of each signed and stamped to certify the beneficial owner's country of residence. The tax authorities will normally keep one Modulario 111 for their own records. The beneficial owner then returns the three remaining Modulario 111 to the LuxCSD customer.
- (Upon receiving the three remaining Modulario 111 back from the beneficial owner) check all the data, fill in the full name and address, stamp and sign part IV of each of the three Modulario 111.
- Return the three remaining Modulario 111 to LuxCSD's Tax Services Department.
Customers are reminded that they must warrant the completeness and accuracy of the information they supply to LuxCSD. LuxCSD is under no obligation to carry out any investigation in respect of such information.
Submission of the reclaim
Upon receipt of the three Modulario 111, LuxCSD will do the following:
- Verify that the forms fulfil all the necessary requirements;
- Stamp and sign each of them as the custodian;
- Send one Modulario 111 to the Italian Tax Authorities;
- Send one Modulario 111 back to the LuxCSD customer for its records;
- Retain the third Modulario 111 for its records.
After the Italian Tax Authorities have paid the amount reclaimed to the depository, the refund will be credited to the LuxCSD account specified in the customer's original request.
Fee structure
The fee for the Proactive Tax Reclaim Service are detailed under Clearstream Banking International Fee Schedule. The applicable fees for processing of tax reclaims are not included.
Deadline for receipt of documents
The statutory deadline for reclaiming withholding tax is four years following the interest payment date.
Documentation for a standard refund of withholding tax on interest from Italian debt securities must be received by LuxCSD at the latest three months before the statutory deadline.
Fees charged for a tax reclaim
In addition to the standard fee charged by LuxCSD per reclaim form (as detailed in the LuxCSD International Fee Schedule), the fees charged by the local custodian for handling tax refund requests for a customer will be passed on by LuxCSD to the customer.
When are refunds received?
There is no estimated time for receiving a standard refund: it can vary depending on when the application is filed and on the complexity of the information supplied on the reclaim form. However, according to LuxCSD's experience in the market, refunds may be considerably delayed before the budgeted funds become available, possibly up to several years from the date of receipt by the Italian Tax Authorities.
In the event of a delayed tax refund, the Italian Ministry of Finance grants compensation interest on the amounts to be refunded, as explained under General information.