Exemption of dividends and capital gains paid to EU/EEA funds
Undertakings for Collective Investment Schemes (UCIs) under foreign law (compliant with Directive 2009/65/EC, or non-compliant but subject to supervision under Directive 2011/EU) may collect dividends from Italian companies exempt from withholding tax. The same exemption applies to capital gains realized on Italian qualifying holdings.
This is provided for by art. 109 of draft Budget Law 2021, which aims at aligning the tax regime of foreign (European) UCIs with those enjoyed by Italian UCIs.
To date, there is a difference in treatment between Italian and European UCIs, which is seen by the European Commission as a violation of the principles of freedom of establishment and movement of capital in the EU and the European Economic Area (EEA).In fact, Italian law provides for an exemption from corporate income tax on dividends for UCIs established in Italy, while UCIs under foreign law are subject to a 26% withholding tax.
Similar argument for capital gains arising from the sale of qualified holdings in Italian companies realized by EU/EEA funds which are currently subject to a substitute tax of 26% against an exemption regime for the same capital gains realized by Italian UCIs.
The new provisions of art. 109, if confirmed, will take effect and will be effective for dividends received and capital gains realized from the date of entry into force of the Budget Law.