Italy: Swiss social security institute entitled to withholding tax refund; possible refund opportunities

A Supreme Court decision concerning whether a Swiss social security institute was entitled to a withholding tax refund

Swiss social security institute entitled to withholding tax refund

The Italian Supreme Court held that a Swiss social security institute subject to tax in Switzerland (even though exempt from income taxes) is entitled to a refund of the withholding tax imposed on dividends distributed by Italian companies.

The case identifying information is: Decision no. 25195 (24 August 2022)


  • The Swiss social security institute received dividends distributed by Italian companies and paid withholding tax in Italy at the standard rate of 27%.
  • The Swiss social security institute filed a claim for a refund of the portion of withholding tax that exceeded the tax rate of 15% (a reduced rate allowed under Article 10(2) of the Italy-Switzerland income tax treaty).
  • The Italian Supreme Court held that taxation under the income tax treaty was applicable solely because of the other Contracting State’s authority to impose tax on the dividends, with the actual levying of the tax being irrelevant for this purpose.
  • The Supreme Court also found the Swiss social security institute to be the beneficial owner of the dividends, since legally and economically these dividends were at its disposal—meaning that the institute could rely on Article 10(2) of the treaty that provides for a 15% tax rate.

KPMG observation

The decision implies that the liability to tax—for purposes of determining whether a taxpayer is a resident of the Contracting State as defined under Article 4 of the income tax treaty—does not require the actual payment of income tax in the taxpayer’s country of residence.

Tax professionals note that this decision may be significant for entities that are subject to tax, even though exempt, in their country of residence. If the entities receive dividends from Italian entities, they are entitled to rely on Article 4 of the applicable tax treaty (provided the dividends are at their disposal) and thus they can invoke the lower rate of tax provided for by Article 10(2) of those tax treaties that include a similar provision as the one in the tax treaty with Switzerland.

Given this decision, social security institutes and similar entities need to consider challenging what may have been a “silent” rejection of previously filed refund claims by appealing to the Italian Tax Court. Those entities that have not yet filed administrative refund claims need to consider filing such claims within 48 months of paying the tax.

Read a September 2022 report [PDF 277 KB] prepared by the KPMG member firm in Italy


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