There are three kinds of withholding taxes applicable at source on certain payments.
Dividends for non-qualifying holdings received by individuals (outside the scope of a business activity) are subject to 26% withholding tax.
Dividends for qualifying holdings in Italian companies received by individuals (outside the scope of a business activity) are not subject to withholding tax. Where the dividend relates to foreign companies, 26% withholding tax is payable for the taxable portion of the profit with a reduction for taxes paid abroad. Double taxation agreements that could reduce or eliminate tax liabilities are taken into account.
Qualifying holdings are shares (other than savings shares) and any other investment in the capital or equity of a company to which voting rights are linked exceeding 2% or 20%, if the securities are traded on a regulated market, or 5% or 25% in other cases.
Where dividends are received by entities (not individuals) not resident in Italy, they are generally subject to a 20% withholding tax. This rate may be reduced to 1.375% if certain conditions are met.
Dividends received from a foreign company deemed to be based in a tax haven are taxable in full unless otherwise agreed with the Revenue Agency.
Residents for tax purposes in Italy: interest on current and deposit accounts with banks, bonds and similar securities is subject to withholding tax of 26%, usually applied on account (gross interest is included in taxable income and the withholding is deducted from the gross tax). If the interest is received by residents outside the scope of a business activity, the withholding tax is applied in settlement and interest is not part of the overall taxable income. Interest on loans is usually subject to 12.5% withholding tax.
Non-residents for tax purposes in Italy: interest on current and deposit accounts, bonds and similar securities is not subject to withholding tax. If the individual is resident in a tax haven, a 20%-26% withholding tax applies. Interest on loans is usually subject to 12.5% withholding tax on settlement unless there is a double taxation agreement in place.
Withholding tax is not payable where interest is paid to companies or permanent establishments in Italy or other Member States of the European Union.
Royalties generated in Italy and received by subjects not resident in Italy for tax purposes are normally subject to a 30% withholding tax in settlement, although this may be reduced subject to double taxation agreements.
Withholding tax is not payable on royalties paid to companies or permanent establishments in Italy or other Member States of the European Union.