20% withholding tax on foreign income remitted into Italy - almost banished!

I saw some great news regarding the proposed withdrawal of the 20% withhholding tax on income remitted from abroad into Italy.  The law which could have been reintroduced again in July 2014.

It now transpires that the Ministero dell’Economia e delle Finanze is filing the latest amendments to the Income Tax Spending Review, on which it is being fully recommended that the 20% withholding tax on foreign source income, be repealed. 

It appears to have been accepted that income arising from investments held abroad will be considered to have be subject to the necessary withholding taxes, (should it have been declared properly) or where an intermediary is involved in the collection of the income/gains taxes, that the necessary deductions will have automatically been made.  

The Ministero dell’Economia e delle Finanze, in tandem with this news, were also quick to point out that the information on the foreign source income, attributable to the usual income and capital gains taxes will now be fully available through multi lateral exchange of information channels.  i.e Governments exchanging tax information automatically.

On this note, when the withholding tax announcement was postponed and a reference was made to the fact that Italy would likely follow the OECD recommendations for cross border exchange of information, I decided to read the OECD proposals in this regard and did a little internet research to try and discover more about the cross border share of financial information controls.

As I have already explained in previous Ezine’s, Italy, UK, Spain, France, Germany and the USA have already entered into automatic exchange of information agreements (since 2012).  It seems that this is happening now more methodically, but one of the biggest hurdles is agreeing a format in which to share  the information so that it can be quickly interpreted by each receiving Government.

In other words, they are arguing over whether to use Microsoft, Google, or Apple software!

Joking aside, it seems that this is one of the main criteria for the effective use of cross border exchange of information controls  

If this is the only thing holding them back then I think we can assume that the withhholding tax that Italy was trying to introduce will not be resurfacing in another guise, but will be buried for good.

However, as always I retain the right to be proved completely wrong where the Italian authorities are concerned and can only advise, as always, that an ‘in regola’ position is maintained for Italian tax residents.

If you would like to know more about this, discuss your own tax planning circumstances or ways to improve your financial position in Italy then you can contact me on gareth.horsfall @spectrum-ifa.com or on cell +333 6492356