In the sentence in question, the Supreme Court has in fact recognized the tax credit on dividends received from foreign investments even if subject to substitute tax pursuant to art. 18 of the Presidential Decree n. 917/1986 or withholding tax applied by resident intermediaries, pursuant to art. 27, paragraph 4 of Presidential Decree n. 600/1973.
It was therefore introduced the possibility to deduct from the Italian substitute tax the withholding taxes applied on dividends in the source States, solution that until now was never accepted by the Italian Revenue Agency.
The Supreme Court refers to non-qualified participations but similar considerations apply to qualified participations after the reform of 2018. Principles expressed by the Supreme Court could also be extended to other capital income subject to mandatory substitute taxation, such as interest, premiums and similar revenues on bonds.
The foreign tax credit is allowed if the Conventions for the avoidance of the double taxation do not expressly prevent it. In practice, almost all the old Conventions allow the recovery of the withholding tax made in the source State.
Sentence 25698 offers therefore the possibility of requesting the refund of foreign withholding taxes, both in the case in which the foreign dividends have been collected directly (art.18 of Presidential Decree) and in the case in which, instead, they were received through a resident intermediary (Article 27, paragraph 4 of Presidential Decree no. 600/1973).
In the latter case, the refund can be requested both by the taxpayer and, on his behalf, by the intermediary.
The reimbursement must be made no later than 48 months from the date of the payment (see Article 38 of Presidential Decree no. 602/1973). As of today, payments made starting from the year 2019 could be therefore included in the reimbursement requests.
Following the refusal of reimbursement, express or tacit, by the Italian Revenue Agency, a litigation may be started before the Tax Courts.
