Home / Publications / Tax regime of foreign investment funds equated to...

Tax regime of foreign investment funds equated to Italian funds

The current Italian domestic rules provide for the exemption from corporate income tax only for dividends and capital gains received by investment funds established in Italy, while those received by investment funds established abroad are subject to a withholding tax of 26%.

The exemption will apply to dividends received by investment funds established abroad in accordance with Directive 2009/65/EC (so-called UCITS IV Directive) or those whose management company is subject to forms of supervision in the country of establishment in accordance with Directive 2011/61/EU (so-called AIFM Directive), if established in a Member State of the European Union or in a State that belongs to the EEA allowing an adequate exchange of information with Italy. The exemption will also apply to capital gains (and losses) realised through the sale of qualified shareholdings of companies resident in Italy, similarly to what is already provided for by other provisions for non-qualified shareholdings.

As clarified in the explanatory report, the amendment is aimed at overcoming the existing differences by equating the tax treatment applicable to dividends and capital gains earned by foreign investment funds to the one currently granted to Italian investment funds. The different treatment has been recently put under review by the European case-law which has ruled on the contrast between the principle of free movement of capital and the discrimination provided by the tax regime reserved to foreign investment funds (see judgments of the ECJ in Case C-480/16, Fidelity Funds and in Case C-156/17, Köln-Aktienfonds Deka). It is likely that with this amendment Italy intends to prevent the EU Commission, which seemed to deal with the issue in the EU Pilot project (Eu pilot 8105/15/TAXU), from initiating infringement proceedings.

The draft Finance Act 2021 specifies that both amendments introduced will be applicable as from the date of approval of the law. In any case, overcoming the discrimination could also have positive effects on administrative or judicial proceedings already initiated or to be initiated on the basis of the principles established by EU case-law and aimed at obtaining the reimbursement of withholding taxes levied in past years. In this regard, it is worth mentioning – in the interest of those who would like to file a request for reimbursement of withholding taxes levied in the past – that the statute of limitations rule provides that the request for reimbursement must be submitted within 48 months from the date of the tax payment.


Portrait of Stefano Chirichigno
Stefano Chirichigno
Portrait of Berardo Lanci
Berardo Lanci
Portrait of Mario Martinelli
Mario Martinelli
Portrait of Marta Puccini
Marta Puccini
Senior Associate
Portrait of Vittoria Segre
Vittoria Segre
Show more Show less