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The Supreme Court (Ordinances, no. 523/2022 and no. 524/2022) has once again ruled on whether entities other than corporate companies - and, in particular, Spanish investment and pension funds - are also entitled to the reduced withholding tax applied to EU outbound dividends from Italy as a result of the ruling of the CJEU in Case C-540/2007 of November 19, 2009.
In that case - as well known - the CJEU had declared the illegitimacy of art. 27, para. 3, of Presidential Decree no. 600/1973 which, at the time, in providing for a withholding tax of 27% on profits paid to non-residents, made no distinction between EU and non-EU shareholders and, as a result, discriminated against the former by subjecting them to heavier taxation than that provided for domestic dividends, which were instead subject to a reduced withholding tax.
The Supreme Court’s orientation - although neither new nor innovative - boasts several points of interest.
The Judges have clarified the legal conditions and assumptions that justify and legitimize the effective application of the principles affirmed by the CJEU, with specific reference to corporations, for these entities as well.
In this regard, it has been clarified that the legal form of the entity (corporate company or entity of different nature) is irrelevant; what is important is its tax residence in an EU Member State and its liability for corporate income tax in that state. On this point the Court has specified that the withholding tax envisaged by art. 27 of Presidential Decree 600/73 is applied not only to EU corporate companies that receive domestic dividends but also to other entities that receive the same dividends, and therefore the objective of exempting dividends to avoid double economic taxation must be irrespective of the legal qualification of the recipients, thus affecting every distribution with a guarantee of full equality of treatment.
Briefly, in the Court's opinion, any entity established in the European Union which is considered a taxable person for the purposes of corporate income tax (a condition met by all those companies "potentially" subject to CIT, regardless of whether they enjoy tax benefits that are in any event compatible with EU law) is entitled to the application of "the Italian taxation on dividends" at a reduced rate (in the case examined equal to 1.375%) instead of the ordinary rate (equal to 27%) or the conventional rate (which for the Italy-Spain Convention is 15%).
The thesis put forward by the Revenue Agency - which maintained the inapplicability of said principles to entities other than corporate companies - was therefore largely disregarded by the Supreme Court, who also considered irrelevant the reference to the new regulations applicable to resident investment funds, in relation to which no discriminatory treatment could be identified. In the Court's opinion, the choice of the Italian Legislator to apply a different taxation regime to resident persons cannot assume any relevance for the purposes of compliance with EU principles, representing the result of a free choice that can at most be reviewed in the light of constitutional principles.
The principles affirmed in the case law at stake appear, moreover, to be particularly topical for the similar issues that are now being examined by lower Tax Courts regarding the alleged discriminatory treatment reserved by the Italian law for withholding taxes applied to dividends received by UCITs established in EU Member States (and in EEA countries), in relation to which it has been favourably accepted the EU operators request for recognition of undue application of higher withholding taxes (Re:. Provincial Tax Court of Pescara, Decision no. 49/1/2022).
