The judgment of the Court of Cassation n. 25698 of 1 September 2022 opens the way for requests for reimbursement of taxes paid in Italy regarding foreign dividends and other foreign capital income subject to compulsory substitution taxation in Italy. In fact, the judgment recognizes the tax credit on foreign dividends subject in Italy to «not optional» alternative taxation, by deduction as a withholding tax pursuant to Article 27, paragraph 4, of Presidential Decree 600/1973, or by substitute tax ex Article 18, paragraph 1 of Presidential Decree 917/1986.

Many taxpayers, in fact, conforming to the practice of the Revenue Agency have so far suffered double taxation, only partially mitigated by the withholding tax on the so said «net border» for the foreign dividends received (Article 27, paragraphs 4 and 4-bis, of Dpr 600/1973).

In its judgment 25698/22, the Court of Cassation stated that most of the Treaties against double taxation concluded by Italy, if, on the one hand, they provide in Articles 23 or 24 for the possibility of deducting from the taxes referred to in Article 2 income tax paid in the foreign State, on the other hand, they provide that «no deduction will be granted where the income item is taxed in Italy by means of a tax deduction at the request of the recipient under Italian law» by concluding that the tax credit must be recognised where substitute taxation is the only regime allowed.

However, that conclusion should not be limited to dividends from unqualified holdings and, from 2018, also from qualifying holdings, always outside the business year, being applicable to all other foreign-source property income subject to compulsory substitution taxation such as, for example, interest, premiums and other incomes deriving from foreign bonds and similar securities which, according to Article 4, paragraph 2 of Legislative Decree 239/1996, cannot benefit from ordinary taxation (circular 9/E/2015). In such cases, in fact, according to the Agency, the taxpayer is obliged to self-liquidate the substitute tax in the moment of the tax return.

It is therefore advisable that interested parties should identify the exceeding payments to be claimed for reimbursement, considering that Article 38 of Presidential Decree 602/1973 provides for a limitation period of 48 months from the payment. In this regard, useful references can be drawn from the jurisprudence of the Court of Cassation according to which the period of limitation starts from the date of payment and not from that in which a subsequent decision has taken place which has established that it is not lawful. According to this interpretation, the claims for reimbursement could affect at least all major payments made from 2019.