TAXATION IN ITALY

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Withholding taxes are applied to various payments. The following are the most important.
Dividends
Dividend income received by individuals not carrying out business activities is subject to personal income tax (IRPEF) as follows:

• tax computed and paid by the taxpayer on a specific percentage of the dividend amount, if related to
qualified participations;
• 26% substitutive final tax withheld at source for the total amount, if related to non-qualified partici- pations.
More precisely, for the dividends received by individuals related to qualified participation, three different per- centages apply:
• 58,14% for dividends generated with profits gained from January 1st, 2017 to December 31st 2017;
• 49,72% for dividends generated with profits gained from January 1st, 2008 to December 31st,2016;
• 40,00% for dividends generated with profits gained by December 31st,2007.
As per Budget Law 2018, the above rules are applicable to dividend from qualified participations generated with profits gained within 2017 and in case the distribution resolution is adopted within December 31st 2022. Dividends deriving from subsequent gains/resolutions are subject to substitutive tax at 26% regardless of the type of participation (qualified/non-qualified).
Qualified participations are participations entitling to:
• more than 2% of voting rights in an ordinary meeting or 5% of capital or corporate assets for quoted companies;
• more than 20% of voting rights in an ordinary meeting or 25% of capital or corporate assets for other companies.
Dividends of foreign source from black list countries are subject to ordinary tax on 100% of their amount. 26% advance withholding tax applies.
Dividend paid to non-residents (other than EU companies) are subject to a 26% final withholding tax. Reduced rates and reimbursement may apply (leading to a 15% effective tax rate), provided that certain conditions are met. Dividends paid to EU companies are subject to a 1,20% final withholding tax.
Payments to a qualifying EU parent company are exempt from withholding tax under the Parent-Subsidiary Di- rective, according to specific conditions.
Interests
Interest on bank deposits and current accounts is subject to a 26% substitutive final tax withheld at source. Other interests on loan, deposits and current accounts are also subject to a 26% advance withholding tax.
Interests on bonds and other financial assets are subject to 26% advance or final withholding tax according to various conditions.
Interests paid to non-residents are subject to the same rates applied to resident individuals; the withholding tax is applied on a final basis. Interest paid to non-residents on deposit accounts with banks and post offices is exempt. Payments to associated EU Companies are exempt under the EC Interest and Royalties Directive, provided that certain conditions are met.