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The new Italian tax regime on dividends and capital gains realized by foreign UCIs

The new Italian tax regime on dividends and capital gains realized by foreign UCIs
The Budget Law 2021 (Law n. 178/2020) introduces a new tax regime for Italian source dividends and capital gains realized by EU or EEA UCIs. The purpose of the new regime is to remove the discrimination against foreign UCIs, in comparison with UCIs established in Italy, which gave rise to the pending infringement procedure EU PILOT 8105/15/TAXU.

As a result of the new tax regime, the Italian market has definitely become more attractive to EU or EEA UCIs, who in the past have been unfairly discriminated against compared to those of Italian origin, but it still remains an unjust tax treatment for other foreign UCIs.


  1. The previous tax regime

Primarily, it should be noted that Undertakings for Collective Investment (UCIs) established in Italy, who are subject to regulatory supervision, are liable to Italian Corporate Income Tax (IRES), but exempt from it under Art. 73, sub. 5-quinquies, Presidential Decree no. 917/1986. Therefore, they are not subject to any dividend or capital gain tax with respect to their Italian equity investments. The same rules apply to historic Luxembourg funds.

Conversely, until December 31, 2020, for all UCIs not established in Italy:

  • dividends paid by Italian resident companies were subjected to tax in Italy through a 26% final withholding tax pursuant to Art. 27, sub. 3, Presidential Decree no. 600/1973;
  • Italian source capital gains were considered:
    • not subject to taxation if derived from the disposal of non-substantial shareholdings in Italian companies traded on regulated markets [art. 23, co. 1, lett. f), no. 1), TUIR] or, in any case, if the foreign UCIs were located in States that allow for an adequate exchange of information [Art. 5, sub. 5, Legislative Decree no. 461/1997];
    • subject to taxation in Italy in other cases, through a 26% substitute tax pursuant to Art. 5 Legislative Decree no. 461/1997.

The described taxation could be reduced in accordance with the Treaties for the avoidance of double taxation concluded between Italy and the country of tax residence of the UCI, if the UCI was entitled to the relevant benefits.


  1. The new tax regime for EU or EEA UCIs

Starting from January 1, 2021, for UCIs:

  • complying with EU Directive 2009/65/EC or managed by fund managers authorised pursuant to EU Directive 2011/61/EU, and
  • established in a EU States or EEA States allowing for an adequate exchange of information with the Italian tax authorities,

dividends paid by Italian resident companies and capital gains derived from the disposal of substantial shareholdings in Italian resident companies, or held in Italy, are not subject to tax.

Therefore, the new provisions eliminate the discrimination against EU or EEA regulated UCIs, compared to those established in Italy.


  1. Outstanding issues

There are two outstanding issues:

  • the first concerns the retroactive application of the new rules: considering that the Italian legislation has been amended since it was in contrast with EU principles, the taxation suffered in the past by foreign UCIs is illegitimate and, consequently, they should be entitled to obtain reimbursement of the withholding taxes applied in the past (or taxes paid directly in the past);
  • the second relates to the scope of application of the new rules: the new tax regime refers exclusively to EU or EEA regulated UCIs, thus other foreign UCIs are still discriminated against.


  • Giovanni Mercanti
  • Nicole Lettori
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