The Court confirms the legitimacy of the refund for double taxation of foreign dividends

With ruling no. 423/2023, filed on July 29, 2024, the First-Tier Tax Court of Verona recognized the legitimacy of a refund requested by a taxpayer for double taxation on foreign dividends. In the specific case, the taxpayer, residing in Italy, received a dividend from a Dutch company, which was subject to a 15% withholding tax in the Netherlands. Subsequently, the same dividend was subject to a substitute tax of 26% on the gross amount in the Italian income tax return (under Article 18 of the Italian Income Tax Code, TUIR).

The judges in Verona held that the lack of recognition of the deductibility of foreign taxes paid on dividends, due to the inability to apply a tax credit for income subject to substitute tax, creates an unjustifiable disparity in treatment, as well as an excessive tax burden on the taxpayer. Consequently, the Court recognized the right to a refund as legitimate, considering the current regulatory impossibility of obtaining the deduction through the tax credit mechanism.

The ruling consolidates the position initiated by the Supreme Court decision no. 25698 of 2022, confirming that taxpayers who have suffered double taxation on foreign dividends may proceed by filing a refund request and, if necessary, entering into litigation to recover the excess taxes paid. Refund requests may be submitted within 48 months after payment.

Our Firm, with specialized teams in International Taxation and Tax Litigation, is available to provide further information on this matter.