New rules on taxation of dividends arising from a tax haven
The Budget Law 2018 provides that dividends paid, directly or indirectly, by companies located in a tax haven will be 50 percent excluded from the taxable income of the resident shareholder.
This happens if it can prove (also through the tax ruling) that the foreign company carries out a commercial activity and pass the so called ‘business test’.
In such cases, the resident shareholder can benefit from a foreign tax credit for income taxes paid on profits accrued by the company resident in the tax haven.
Anyway, in order to understand if the dividends have been gained in a tax haven, the Budget Law 2018 also provides that, the shareholder has to refer to the rules in force in the year when the profits accrue:
• Dividends received since the fiscal year after the one in progress on 31 December 2014, but accrued in an earlier year, in which the foreign company was resident in territories not included in the D.M. November 21st 2001, are not considered to have arisen in a tax haven.
• Dividends accrued in the fiscal year after the one in progress on 31 December 2014, and in which the foreign company was not considered to be resident in a tax haven, will not be treated as having arisen from a tax haven, even if paid in a year when the foreign company was considered to be resident in a tax haven.
Andersen & Legal is at your disposal for any additional clarification and explanation.