Investment funds have submitted reclaims for WHT levied on outgoing dividends, based on the incompatibility of Italian domestic rules regarding the freedom of movement of capital within the EU, for the period before 1st January 2021.
As mentioned in a previous Tax Fund Alert issued in 2022, we continue observing positive decisions being rendered to investment funds across the different court levels in Italy.
In May 2025, a case won by a Luxembourg fund (SICAV) at the Italian second instance Tax Court of Pescara was rendered final since the ITA Advocate General did not appeal the case before the Court of Cassation. As a consequence, the investment fund will be entitled to a refund of the suffered WHT plus late interest.
This event confirms the entitlement to a refund of the withholding tax (“WHT”) imposed on dividends distributed by Italian companies, considering the incompatibility of national Italian provisions with the free movement of capital under the Treaty on the Functioning of the EU (TFEU).
Considering the positive outcome, we continue to recommend initiating court proceedings, if not done yet.
Currently WHT reclaims are subject to a tacit rejection if no answer of the tax authorities is issued within 90 days after the filing of said reclaim. Taking into consideration that the Italian tax authorities do not reply to the WHT reclaims, the sole way forward to obtain a refund is an appeal before the Court. Therefore, we believe the next logical step is to launch court proceedings with the Italian court.
It should be noted that in case of success, an annual interest of 2% should normally also be granted by the Italian tax authorities.
