Participation exemption regimes could cost WHT reliefs under EU Parent-Subsidiary Directive and DTAAs

Following some recent Italian Supreme Court rulings, uncertainty remains as to the position of the Italian Revenue Authority on the Withholding Tax Exemption under the EU Parent-Subsidiary Directive and the bilateral tax treaties concluded between Italy and other EU Member States. This blog considers (i) these developments, (ii) the influence of EU case laws on this matter, (iii) the cross-border relief measures and (iv) the impact on holding companies that may (potentially) be exposed to (significant) dividend withholding tax leakage.


08 Jan. '21 Dewald Claassen

This blog clarifies the recent Italian Supreme Court rulings on, among other requirements, the effect of participation exemption regimes in the EU. These rulings deal with the exemption of withholding tax (“WHT”) on dividends in Italy, based on: the EU Parent-Subsidiary Directive, Italian bilateral tax treaties (“DTAAs”) and the participation exemption regimes applied in the resident state of the recipient of the dividends. In this regard, cases with a focus on Dutch and Luxembourg holding companies and their respective participation exemption regimes have been selected. These regimes are relatively generic in nature and should, if the requirements of the participation regimes be met, exempt dividends.


Dewald Claassen

Dewald Claassen is an associate at NovioTax

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