Dividends
The income of companies and associations subject to IRES is only taxed when it is earned. As a result, the company pays IRES on a permanent basis, and shareholders do not receive any tax credit on the distributed profits.
Dividends received by Italian entities are taxed as follows:
- Dividends from resident companies are subject to taxation on only 5% of the total amount.
- Dividends received from companies in countries with a preferential tax regime are fully taxable.
- Dividends paid to companies based in EU member states and European Economic Area (EEA) countries that have appropriate tax information exchange agreements with Italy are typically subject to dividend withholding tax at a rate of 1.375%.
The Italy dividend withholding tax regime depends on the residence of the company issuing the dividends and the tax regime of the relevant country.
Interest
Interest on bank deposits and current accounts is subject to a 26% substitutive final tax withheld at source. Other interest on loan, deposits and current accounts is also subject to a 26% advance withholding tax. Interest on bonds and other financial assets is subject to 26% advance or final withholding tax according to various conditions.
Interest paid to non-residents is subject to the same rates applied to resident individuals; the withholding tax is applied on a final basis. Interest paid to non-residents on deposit accounts with banks and post offices is exempt.
Payments to associated EU Companies are exempt under the EC Interest and Royalties Directive, provided that certain conditions are met.
