Italy: Imposition of IRAP on dividends received by financial intermediaries from subsidiaries resident in other member states is contrary to EU law (CJEU judgment)
Contrary in particular to EU Directive 2011/96
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August 1, 2025
The Court of Justice of the European Union (CJEU) today held that Italy’s imposition of the regional tax on production activities (IRAP) on 50% of dividends received by financial intermediaries resident in Italy from subsidiaries resident in other member states is contrary to EU law, in particular to EU Directive 2011/96 on the common system of taxation applicable in the case of parent companies and subsidiaries of different member states.
The case identifying information is: Joined cases Banca Mediolanum (C-92/24 and C-94/24)
Summary
As explained in a CJEU release:
- The taxpayer, a bank resident for tax purposes in Italy, received dividends from its subsidiaries which had their tax residences in other EU member states. The taxpayer included those dividends in the basis of assessment for corporation tax (IRES), up to a maximum of 5% of their amount. In its capacity as a financial intermediary, it also included those dividends in the basis of assessment for IRAP, corresponding to 50% of their amount, as required under Italian law.
- The taxpayer subsequently applied for a refund of that proportion of IRAP, claiming that the applicable provision of Italian tax law is contrary to EU law. The tax authority rejected that application, arguing that the provision is not contrary to EU Directive 2011/96 (on the common system of taxation applicable in the case of parent companies and subsidiaries of different member states), and the Italian court before which the cases are pending sought an interpretation of that directive from the CJEU.
- The CJEU found that when a member state chooses the exemption system (as opposed to the imputation system) under EU Directive 2011/96, the member state is precluded from enacting national legislation levying tax on more than 5% of the amount of the dividends which the financial intermediaries resident in that member state receive from their subsidiaries resident in other member states, including when that is done by way of a tax which is not a tax on corporate income, such as IRES, but which includes in its basis of assessment those dividends, or a fraction thereof, as is the case with IRAP.
Read an August 2025 report prepared by the KPMG EU Tax Centre