Income of companies and associations subject to IRES is only taxed when it is produced. The company therefore pays IRES permanently and shareholders are not entitled to any tax credit on the profits received.
Dividends received by Italian entities are subject to taxation as follows:
- dividend received from resident companies are taxed at 5% of their amount;
- dividend received from companies located in countries with a preferential tax system are fully taxable.Dividends paid to companies based in member states of the European Union (EU) and in members of the European Economic Area (EEA) that allow a suitable exchange of information with Italy, are generally taxed at source (WHT) at a rate of 1.375%.
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.