Italy Tax Treaties with other countries

Italy has signed Double Taxation Agreements (DTA) with 103 countries.
A standard rate of 26% withholding tax applies to interest on loans paid to Italian resident entitles to both Italian and non-Italian resident investors.
The rate may be reduced under the tax treaties between countries.
If domestic rate applied is higher than the conventional basis, non-resident taxpayers can claim a refund of all, or part of taxes paid and not due according to conventional provisions.

Italy Tax Treaties with Taiwan
Italy Tax Treaties with China

Email: mxp4ww@evershinecpa.com
The Engaging Manager from Headquarter
Ms. Anna Wang, Speak Italian English, and Chinese.
skype: burlinna

We set up below judgment criteria on Treaty application:

Scenario:
If you are not an Italian legal resident, and if your resident country has DTA with Italy, and if you are without PE (Permanent Establishment), please go to Section A.
If you are not an Italian legal resident, and if your resident country has DTA with Italy, and if you are with PE (Permanent Establishment) please go to Section B.
If you are not an Italian legal resident, and if your resident country has no DTA with Italy, please go to Section C.

Section A:
Scenario:

If you are not an Italy legal resident, and if your resident country has DTA with Italy, and if you are without PE (Permanent Establishment), it will be deemed as “non-Italy Domestic Sourced Income”.
That means Italy will levy zero-tax.
However, your still need to send zero-tax application to Italy Tax Bureau for being approved.
Below, we will let you understand through Q&A.

DTA-Q-10:
In Italy, which foreign legal resident company can apply for zero tax rate without PE under DTA?

DTA-A-10:
Italy has signed DTAs with over 103 countries:

DTA-Q-20:
Why does the Country’s foreign capital without a permanent establishment (PE) in Italy, under the DTA enjoy zero tax rate?

DTA-A-20:
It follows Article 5 and Articles 7 in the DTA Treaty. The article defines if foreign entity having PE in Italy. Article 7 regulate if no PE, non-Italy domestic sourced income will not be levied tax in Italy.

DTA-A-Q30:
Under what circumstances are deemed to have no PE, and will the establishment of a foreign-funded subsidiary in Italy be regarded as a foreign-funded subsidiary in Italy?

DTA-A-30:
According to DTA Article 5 item 7, A Wholly Foreign Owned subsidiary in Italy will not be treated as PE because it is a separate legal entity.

That means if an Italy Subsidiary pay service fee to non- Italy Parent Company through service contract signed between subsidiary and non – Italy Parent company
as an investor, non- Italy Parent Company can apply zero tax.
As for if paid amount being reasonable, it will get involved TP (Transfer Pricing) judgement by Italy Tax Bureau.
Please see Italy Transfer Pricing webpage.

DTA-Q-40:
If a foreign company establishes a branch or office in Italy, can the zero-tax rate without PE be applied?

DTA-A-40:

According DTA Article 5 item 2, If foreign company set up a branch or Office in Italy, then will be considered as Italy domestic Income.
But According DTA Article 5 item 4，if an Office is only doing preparatory or auxiliary activity, will apply zero-tax rate.

DTA-Q-50:
What is the procedure for Italy to apply for zero tax rate under DTA without PE?

DTA-A-50:

In order to claim refunds, exemption or application of the reduced tax rate on income paid to non-residents, the Italian Revenue Agency published 4 forms.

Forms A, B, C or D can be used by non-residents

1. To obtain the direct application of the Convention for the avoidance of double taxation (DTC) in force;
2. To request for the refund of Italian taxes applied on Italian source income.

The forms must be filled in in all their parts and completed with the statement issued by the Tax authority of the State in which the recipient of the income is resident.
Said forms are submitted to the Italian withholding agent that may apply directly, under its own responsibility, the reduced rate or exemption provided for by the DTC.
The forms are organized in 2 copies

1. One for the Italian withholding agent or, in the case of refund requests, for the Centro Operativo di Pescara (competent Italian Office for refunds requested by non-residents);
2. One for the beneficiary of the income.

Forms can be retrieved from the below web portal.

https://www.agenziaentrate.gov.it/portale/web/english/nse/business/double-taxation-relief/conventions-for-the-avoidance-of-double-taxation

In case of refund claims, taxpayers have to submit the request within 48 months from the date on which the tax was paid or withheld at source and send it to:
Agenzia delle Entrate – Centro Operativo di Pescara – via Rio Sparto, 21 65129 Pescara, Italia.
Email: cop.pescara.rimborsinonresidenti@agenziaentrate.it

Section B:

Scenario:

If you are not an Italy legal resident, and if your resident country has DTA with Italy, and if you are with PE (Permanent Establishment), your income will be considered as Italy domestic sourced income.
As for levying Tax Rate, please be aware:
if Italy Tax rate > DTA Rate, adopt DTA Rate; if Italy Tax rate < DTA Rate, adopt Italy Rate.

Below, we will let you understand through Q&A

DTA-Q-60:
What are the factors that are deemed to be the country’s domestic source income?

DTA-A-60:

1. Income from land and buildings situated in Italy.
2. Investment income paid by the state, a resident person or the Italian permanent establishment (PE) of a nonresident person, with some exceptions.
3. Business income derived through a PE in Italy .
4. Miscellaneous income derived from activities carried out, or property situated, in Italy.
5. Capital gains on the transfer of participations in Italian companies, with some exceptions.
6. fees paid by the state, a resident person or the Italian PE of a nonresident person as consideration for the use of intellectual property, industrial patents and trademarks and/ or for the performance of professional services or artistic activities in Italy.

DTA-Q-70:
Does Article 5 and Article 7 in the DTA take precedence over the Italy determination factors on Italy’s domestic sourced income?

DTA-A-70:

When DTA is applied, in the event of a different PE definition between Italy domestic tax laws and Article 5 in the DTA, the definition under the DTA shall prevail the domestic regulations.

When DTA is applied, if foreign company being defined as without PE (Permanent Establishment) in Italy, then will be considered non-Italy domestic sourced income, in the event business profit is relevant to this issue, the clause in Article 7 in the DTA zero-rate tax can be applied accordingly.
In this scenario, please see section A.

DTA-Q-80:
When non-tax residents of Italy have Italian domestic sourced income, what is the withholding tax rate according to Italy tax regulations excluding DTA?

DTA-A-80:

The withholding tax rates under domestic law are:

Business Profits – 30% (Note 1)

Dividend – 26% (Note 2)

Interest (General loan) – 26% (Note 3)

Royalties fee – 30% (Note 4)

Technical services – 30%

Professional services – 0% (Note 1)

Note:

1. 30% applies to all services income paid to nonresidents. The 30% withholding tax is a final tax and applies both to payments for services rendered in Italy by a nonresident company without a PE in Italy and to payments for services rendered in the course of independent activities carried on in Italy by a nonresident professional.
2. A nonresident recipient of dividends that have been subject to Italian withholding tax may obtain a refund for a part (11/26) of the tax withheld if it can provide a certificate from the tax authorities of its country of residence to the effect that it has paid tax on the dividends in tax country. No withholding tax is levied under the Italian domestic law implementation of the EU Parent-Subsidiary Directive, for dividends paid by an Italian company to a parent company, if the parent is a tax resident in an EU member state.
3. 0% on interest paid by an Italian company to an associated Swiss company may also be exempt under Article 15 of the EU Savings Agreement, subject to the same conditions as those that apply under the EU Interest and Royalties Directive.
4. 30% rate is applied to 75% of the gross amount of the royalties resulting in an effective rate of 22.5%. Royalties meeting the requirements under the domestic law implementation of the EU Interest and Royalties Directive (defined as Italian company to an “associated company” resident in another EU Member State).

DTA-Q-90:
If DTA Tax Rate is higher than the Italian tax rate, apply which tax rate?

DTA-A-90
As for levying Tax Rate, please be aware:
if ItalyTax rate > DTA Rate, adopt DTA Rate; if ItalyTax rate < DTA Rate, adopt ItalyRate.

DTA-Q-A0:
When non-tax residents of Italy have Italy’s domestic sourced income, what is Italy’s application procedure based on the DTA preferential tax rate?

DTA-A-A0:

In order to claim refunds, exemption or application of the reduced tax rate on income paid to non-residents, the Italian Revenue Agency published 4 forms.

Forms A, B, C or D can be used by non-residents

1. To obtain the direct application of the Convention for the avoidance of double taxation (DTC) in force;
2. To request for the refund of Italian taxes applied on Italian source income.

The forms must be filled in in all their parts and completed with the statement issued by the Tax authority of the State in which the recipient of the income is resident.

Said forms are submitted to the Italian withholding agent that may apply directly, under its own responsibility, the reduced rate or exemption provided for by the DTC.

The forms are organized in 2 copies

1. One for the Italian withholding agent or, in the case of refund requests, for the Centro Operativo di Pescara (competent Italian Office for refunds requested by non-residents);
2. One for the beneficiary of the income.

Forms can be retrieved from the below web portal.

https://www.agenziaentrate.gov.it/portale/web/english/nse/business/double-taxation-relief/conventions-for-the-avoidance-of-double-taxation

In case of refund claims, taxpayers have to submit the request within 48 months from the date on which the tax was paid or withheld at source and send it to:

Agenzia delle Entrate – Centro Operativo di Pescara – via Rio Sparto, 21 65129 Pescara, Italia.

Email: cop.pescara.rimborsinonresidenti@agenziaentrate.it

Section Ｃ:

DTA-Q-B0:
As an investor, if your country has not signed DTA with Italy, what kinds of tax rates when you have Italian relevant income?

DTA-A-Q0:

The withholding tax rates under domestic law are:

Business Profits – 30% (Note 1)

Dividend – 26% (Note 2)

Interest (General loan) – 26% (Note 3)

Royalties fee – 30% (Note 4)

Technical services – 30%

Professional services – 0% (Note 1)

Note:

1. 30% applies to all services income paid to nonresidents. The 30% withholding tax is a final tax and applies both to payments for services rendered in Italy by a nonresident company without a PE in Italy and to payments for services rendered in the course of independent activities carried on in Italy by a nonresident professional.
2. A nonresident recipient of dividends that have been subject to Italian withholding tax may obtain a refund for a part (11/26) of the tax withheld if it can provide a certificate from the tax authorities of its country of residence to the effect that it has paid tax on the dividends in tax country. No withholding tax is levied under the Italian domestic law implementation of the EU Parent-Subsidiary Directive, for dividends paid by an Italian company to a parent company, if the parent is a tax resident in an EU member state.
3. 0% on interest paid by an Italian company to an associated Swiss company may also be exempt under Article 15 of the EU Savings Agreement, subject to the same conditions as those that apply under the EU Interest and Royalties Directive.
4. 30% rate is applied to 75% of the gross amount of the royalties resulting in an effective rate of 22.5%. Royalties meeting the requirements under the domestic law implementation of the EU Interest and Royalties Directive (defined as Italian company to an “associated company” resident in another EU Member State).

Please be aware of the below Warning:
The above contents are digested by Evershine R&D  and Education Center in October 2021.
Regulations might be changed as time goes forward and different scenarios will adopt different options.
Before choosing options, please contact us or consult with your trusted professionals in this area.

Contact Us

Milan Evershine BPO Service Limited Corp.
Email: mxp4ww@evershinecpa.com
The Engaging Manager from Headquarter
Ms. Anna Wang, Speak Italian, English and Chinese.
skype: burlinna

or
For how to exchange data files between your Finance Accounting System and Evershine Cloud Accounting Information System, please send an email to HQ4mxp@evershinecpa.com
Dale Chen, Principal Partner/CPA in Taiwan+China+UK will be accountable for your case.
LinkedIn address:Dale Chen

Additional Information

Evershine CPAs Firm Headquarters
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Tel No.: +886-2-27170515 ext. 105
Mobile: +886-939357000
Email: kerrychen@evershinecpa.com
Skype: oklahomekerry

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(version: 2024/07)

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