Beneficial owners eligible for tax exemption - Italian debt securities
The following types of beneficial owner of Italian debt securities are recognised for tax purposes in Italy:
- Residents of a White List country;
- Central banks and other entities that manage state reserves;
- Supranational organisations recognised as such by Italian law;
- Italian resident corporations.
Residents of a White List country
For income and other proceeds accruing from 1 January 20041, exemption at source is available to a beneficial owner that is resident in a White List country.
A White List country is a country that allows an adequate exchange of information. The official White List is included in the Ministerial Decree of 4 September 1996.
A full reclaim of withholding tax is available through Clearstream Banking if the beneficial owner, being a resident of a White List country according to the requirements of the respective DTT, has not obtained an exemption at source.
The customer can reclaim withholding tax on behalf of the beneficial owner through Clearstream Banking by submitting the appropriate documentation.
Customers are reminded that all standard refund applications depend on the final approval of the Italian Tax Authorities and that Clearstream Banking accepts no responsibility for their acceptance or non-acceptance by the respective authorities.
Important note:
Based on Circular 23/2002, the exemption of institutional investors depends on several conditions:
Exemption is always granted if
the institutional investor is subject to the surveillance of a supervisory authority in their own country of residence; and
the institutional investor and its managing company, if any, are incorporated and resident in States or territories with which Italy has an adequate exchange of information,
Exemption is not always granted if
- The institutional investor is not subject to surveillance in their own country of residence. These cannot enjoy an exemption if they have been organised or incorporated in order to manage investments carried out by a restricted number of participants.
Regarding this category, Circular 20/2003 clarifies that trusts and partnerships and, in general, all other kinds of institutional investors that are not subject to the surveillance of a supervisory authority in their own country of residence can enjoy exemption only if:
- the institutional investor and its managing company, if any, are incorporated and resident in States or territories with which Italy has an adequate exchange of information.
And they declare in writing under their own responsibility that:
- They are experienced and competent in managing financial instruments; and
- They have not been organised or incorporated in order to manage investments carried out by a restricted number of participants; and
- They have not been specifically organised or incorporated in order to enable participants residing in Italy or in states or territories other than those having an adequate exchange of information with Italy to enjoy exemption from Italian withholding tax;
or that:
- They have been organised or incorporated exclusively for managing investment portfolios of institutional investors eligible for exemption.
Supranational organisations
Exemption at source is available to a beneficial owner that is a supranational organisation recognised as such by Italian law.
A full reclaim of withholding tax is available through Clearstream Banking if the beneficial owner, being a supranational organisation recognised as such by Italian law, has not obtained an exemption at source.
The customer can reclaim withholding tax on behalf of the beneficial owner through Clearstream Banking by submitting the appropriate documentation.
Central banks and other entities that manage state reserves
From 19 February 2002, exemption at source is available to a beneficial owner that is a central bank or other entity that manages state reserves, including those that are resident in states or territories other than those having an adequate exchange of information with Italy.
A full reclaim of the relevant amount of withholding tax is available through Clearstream Banking if the beneficial owner is a central bank or other entity that manages state reserves and did not obtain relief at source.
The customer can reclaim withholding tax on behalf of the beneficial owner through Clearstream Banking by submitting the appropriate documentation.
Italian resident corporations
Italian banks and financial intermediaries that hold debt securities in accounts with Clearstream Banking can also benefit from exemption at source if they are:
- A Clearstream Banking customer acting as intermediary, a first level bank2; or
- A beneficial owner of debt securities.
Residents of Italy cannot reclaim withholding tax through Clearstream Banking.
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1. Legislative Decree 239/1996 was converted into law by Law 326/2003 and confirmed by Circular 61/E issued 31 December 2003.
2. A first level bank is any bank or financial institution (other than those directly connected with the Italian Ministry of Finance) acting as an intermediary for the securities lodged in the second level bank. A second level bank is a resident bank or stock brokerage company (or a permanent establishment in Italy of a non-resident bank or brokerage company) in which the securities are directly or indirectly lodged, that is, directly connected to the computer network of the Department of Revenue of the Ministry of Finance. Non-resident bodies and companies acting under a system of centralised administration of securities and directly connected with the Department of Revenue of the Ministry of Finance are treated as equivalent to the above-mentioned banks and companies.