Tax Insight

Italian court confirms that non-EU corporations may claim refunds on dividend withholding taxes paid

Insight
5 minute read
March 11, 2026

What happened?

In a landmark decision (Sentenza n. 93/2026, dated February 17, 2026), the second tier Italian court of Abruzzo (Corte di Giustizia Tributaria di secondo grado dell’Abruzzo) has confirmed that a US corporation controlling an Italian subsidiary is entitled to a withholding tax (WHT) refund on dividends. The court ruled that the application of a 5% WHT rate (under the Italy-United States Double Tax Convention), rather than the 1.2% rate applicable to EU/EEA resident shareholders, constitutes an unjustified restriction on the free movement of capital under Article 63 TFUE.

Why is this relevant?

The court upheld the first-instance decision ordering the Italian Tax Authorities to refund the 3.8% excess withholding tax paid on dividends distributed in 2018.

Actions to consider

This decision represents a significant refund opportunity for non-EU corporations that have received dividends from Italian subsidiaries and paid WHT at rates higher than 1.2%. The court’s reasoning applies the principles established by the European Court of Justice regarding the free movement of capital to third-country (non-EU) shareholders, confirming that discriminatory WHT treatment cannot be justified solely based on residence outside the European Union.

The claim is available also for participations that do not qualify under the EU Parent-Subsidiary Directive (which provides a complete exemption for qualifying EU participation).