Friday, 17 March 2017

Italy's Supreme Court clarifies the concept of beneficial owner

Italy’s Supreme Court issued four decisions on 28 December 2016 in which the court clarified the concept of “beneficial ownership” for purposes of obtaining a reduced rate of withholding tax under Italy’s tax treaties or based on the application of the EU parent-subsidiary or interest and royalties directives. The decisions will be of interest to multinational groups owning participations in Italian subsidiaries through non-Italian holding companies.
Under Italian tax law, dividends, interest and royalties paid to nonresident entities are subject to withholding tax that can be reduced (or fully exempted) based on the provisions of an applicable tax treaty or an EU directive, but only if
the foreign recipient of the payment qualifies as the beneficial owner (i.e. the ultimate owner) of the income.
The beneficial owner status of nonresident holding companies, for which neither Italian tax law nor the OECD provides explicit guidelines, is often challenged by the Italian tax authorities, usually based on the absence of economic substance at the level of the holding company.

Source & more info: Deloitte