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Dividends post Brexit and conventional withholding tax

Dividends post Brexit and conventional withholding tax
With ruling nos. 117 and 128, the Italian tax authority confirms the rules for the application of withholding taxes on dividends paid by Italian companies to their UK shareholders.

Although an agreement promoting a strong partnership between the European Union and the United Kingdom was signed, it was specified that UK cannot be treated as an EU Member State. Consequently, Article 49 TFEU regarding the freedom of establishment cannot be applied, as it is limited within the EU.

Likewise, it is not possible to apply the 1.20% withholding tax envisaged by the Italian domestic law, as it is limited to distributions of profits in favour of companies and entities subject to an income tax in the EU or EEA Member States.

In the case at hand, therefore, Article 10 paragraph 2(a) of the ITA-UK DTA will apply. So, for dividends paid, the applicable withholding tax will be limited to the:

  1. 5% of the gross amount of the dividends if the beneficial owner is a company which controls, directly or indirectly, at least 10% of the voting power in the company paying the dividends;
  2. 15% of the gross amount of the dividends in all other cases.

Our professionals at the Uk Desk in Milan and our London Office are available to provide more information to corporate, private or institutional clients.

  • Luigi Belluzzo
  • Alessandro Belluzzo
  • Enrico Rimini
  • Alberto Franceschetti
  • Ivan Mastrototaro
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