Goodbye Double Taxation, Tax Refunds Are Here

Say Goodbye to Double Taxation on Foreign Dividends

It is now possible to request tax refunds from the Revenue Agency and eliminate the issue of double taxation on dividends received from abroad.
Many Italians who own shares in foreign companies or other types of investments find themselves facing the burden of double taxation: paying taxes both abroad and in Italy.

Two landmark court rulings have clarified that taxpayers can seek a tax refund for these amounts.
One of these important decisions is Verona Tax Court judgment No.
423 of 2023, while the other is Siena Tax Court judgment No.
68 of 2024.
Both rulings uphold the principle that dividends from foreign issuers should not be subject to double taxation.

This principle, rooted in a Supreme Court ruling, allows investors to claim a refund for part of the taxes withheld abroad.
International agreements typically prescribe a 15% tax rate on dividends for non-resident investors.
However, in practice, this refund process is rarely straightforward.

Claiming Tax Refunds

Following the aforementioned rulings, taxpayers can request the Revenue Agency to reimburse the difference between the tax withheld abroad and the local tax rate.
Individuals with holdings in foreign companies receiving dividends typically first pay taxes overseas, which can be substantial – for instance, 35% in Switzerland and 26.375% in Belgium.

Under international agreements, a portion of foreign taxes paid can be refunded to ensure a 15% tax rate.
Subsequently, dividends are taxed in Italy at a rate of 26%.
This rate applies to the dividend net of foreign withholding if the payment is processed through an Italian bank.

If dividends bypass an Italian intermediary, the tax rate is applied to the gross amount, including foreign taxes paid, leading to double taxation.

Reclaiming Paid Taxes

The recent judgments recognize foreign taxes as a tax credit, ending the double taxation issue.
To avoid this double taxation, taxpayers can declare their tax residency and opt for the current bilateral tax treaty rate between the two countries, resulting in a 15% withholding tax on distributed dividends.

Notably, individuals who have experienced double taxation may have a limited timeframe to claim refunds.
Italy is working on additional bilateral agreements with other countries to prevent such refund requests.
For further information, you can also read about Transferring Pension Abroad Without Double Taxation: When Is It Possible?