Nieuwsbericht | 08-01-2007
Brussels, 9 January 2007
Direct Taxation: Commission requests Italy to end the
application of a withholding tax on dividends paid to parent
companies in the Netherlands
The European Commission has sent Italy a formal request to end the
application of a withholding tax on the distribution of dividends to
parent companies established in the Netherlands. The request is in
the form of a ‘ reasoned opinion’, the second step of the procedure
under Article 226 of the EC Treaty, Italy having failed to react to
the letter of formal notice sent by the Commission on the matter. If
Italy does not reply satisfactorily to the reasoned opinion within
two months the Commission may refer the matter to the European Court
of Justice. Since 2003 Italy has switched its tax credit
system for dividend distributions into an exemption regime.
Referring to the jurisprudence of the Italian Supreme Court's
(Corte di Cassazione) delivered under the previous credit system
regime, the Italian tax administration refuses to reimburse to Dutch
shareholders the 5% withholding tax provided for the Italian-Dutch
agreements' provisions on double taxation.
The Commission considers that such withholding tax is contrary to
the parent –subsidiary directive (90/435/EEC) which, under certain
conditions, exempts from any withholding tax distributions between
companies established in different EU member States.
The Commission considers that the Italian tax authorities give a
too extensive interpretation to the parent-subsidiary directive, by
imposing a charge of 5 % on dividends paid to a Dutch parent company.
Commission case's reference number is 2005/4047.
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