Tax Treaty Case Law around the Globe 2020

S. 287Chapter 24 Italy: Rules Governing the Taxation of Intra-Group Dividends Paid by a German Subsidiary Company to an Italian Parent Company

Guglielmo Maisto and Paolo Arginelli

24.1. Introduction

The three decisions discussed in this chapter concern the application article 24(2)(b) of the Germany-Italy Income and Capital Tax Treaty (1989), which provides that dividends paid by German subsidiaries to their Italian parent companies shall be excluded from the Italian tax base. In particular, the Italian Supreme Court dealt with the following issues of interpretation: (i) whether that exclusion is implicitly subject to the condition that those dividends are taxed in Germany upon distribution; and (ii) whether that provision should be regarded as abrogated due to the entry into force of the EU Parent-Subsidiary Directive (implemented by Italy through a domestic provision exempting 95% of the dividends received by resident parent companies and paid by their domestic or foreign subsidiaries).

All three cases concern similar factual patterns and the same taxpayer, albeit in different tax years, and the relevant decisions are consistent with each other in respect of the results and arguments devel...