The Double Taxation Issue

Investors holding foreign securities may face double taxation on their investment income, with foreign countries applying withholding taxes that can exceed 35%. However, under international conventions, non-resident investors are entitled to a reduced tax rate of 15% on dividends. Many investors are unaware of this opportunity, resulting in billions of euros remaining unclaimed in foreign tax coffers each year.

Potential Savings for Investors

By following the correct procedures, investors can potentially save significant amounts on their tax bills. For example, a resident in Italy receiving dividends from a German company could benefit from a reduced tax rate of 15% under the Italy-Germany tax treaty. By claiming refunds on excess taxes paid in Germany, investors can reduce their overall tax burden and maximize their returns.

The Italian Tax Scenario

In Italy, investors holding foreign securities through Italian intermediaries are subject to a 26% withholding tax on dividends. However, by claiming foreign tax credits and following the correct procedures, investors can reduce their tax liability to 37.1%. For those holding foreign securities directly, the tax rate can be as high as 41%, but refunds can be claimed to offset excess taxes paid.

Closing Remarks

While recent court rulings have provided opportunities for investors to seek refunds on excess taxes paid, the Italian government is taking steps to amend tax treaties to prevent revenue losses. Investors are advised to act quickly to claim refunds from the Revenue Agency. With billions of euros at stake, it is essential for investors to be aware of their rights and take advantage of potential tax savings.