Italy – 20% Withholding on Transfers from Foreign Banks Suspended

Italy – 20% Withholding on Transfers from Foreign...

On February 19, 2014, an immediate suspension of Italy’s 20-percent withholding tax went into effect. The withholding had been required any time funds were received from abroad by financial institutions in Italy on behalf tax resident individuals. Any amounts that had been withheld will be repaid by the banks.

Related content

Flash Alert 2014-022

A 19 February 2014 communication from the Italian Finance Ministry publicly announced an immediate suspension of the 20-percent withholding tax to be applied by Italian Intermediaries on funds received in Italy by tax resident individuals from foreign bank accounts1.  A subsequently issued provision by the Tax Agency provides that the 20-percent withholding has not actually been abolished, but the implementation date for the new withholding arrangement has been pushed back to 1 July 2014.

WHY THIS MATTERS

This recently-introduced new compliance obligations and administrative procedures imposed on financial institutions and other intermediaries – and the individuals concerned – in respect of the 20-percent withholding where certain transactions from abroad were concerned have been lifted. 

In its short existence, the rules on the 20-percent withholding had caused a great deal of confusion for individuals transferring money from abroad and to Italian banks (who were obliged to operate the withholding).  The suspension of the 20-percent withholding is, therefore, welcome. 

The communication further states that any amounts withheld under the new law will be repaid by the banks to the individuals concerned.  The Finance Ministry communication states that recent developments in the area of exchange of information and multilateral reporting have rendered the 20-percent withholding unnecessary.

Background

Under the recently-introduced rules, financial institutions (or other intermediaries) were required to withhold tax any time they were involved in a transaction from abroad.  The tax withheld was treated as a payment toward the individual’s final tax liability.  These financial institutions and intermediaries and the individuals concerned, in some cases, had new obligations and administrative procedures to comply with as a result of the new rules.

KPMG NOTE

There is a possibility that the announced suspension will be followed by an abrogation of the relevant legislation.  This remains to be seen. 

FOOTNOTE

1  See: Communication 46, Ministry of Economics and Finance, Rome 19.20, 18 February 2014.  See the “Comunicato Stampa No. 46 del 19 febbraio 2014” (in Italian).

Protocol- Agenzia Dell’Entrate  2014/26443 Rome 19th February 2014.

RELATED RESOURCE

For prior coverage of the 20-percent withholding tax rules and associated obligations, see Flash International Executive Alert 2014-008, 29 January 2014.

The information contained in this newsletter was submitted by the KPMG International member firm in Italy. 

© 2016 KPMG S.p.A., an Italian corporation and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Flash Alert is an Global Mobility Services publication of KPMG LLPs Washington National Tax practice. The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Connect with us

 

Request for proposal

 

Submit

KPMG's new digital platform

KPMG's new digital platform