Italy Suspends Withholding Tax On Treasury Bonds For Foreign Investors

by Ulrika Lomas, Tax-News.com, Brussels

23 November 2001

The Italian Parliament has approved a decree to remove withholding taxes on government treasury bonds (Buoni del Tesero Poliennali) for foreign investors, it has revealed.

According to a Financial Times report on Thursday, the law allowing foreign investors to buy 'tax free' BTP bonds will come into force on January 1st 2002. Maria Cannata, General Director of Public Debt Direction at the Italian Treasury, said exact details of how the law will be simplified and the exemption procedure implemented will not, however, be published in December.

Ms Cannata explained the reasoning behind the decision: 'We realised that a lot of important institutional investors in Europe did not buy BTPs because there were complicated procedures towards paying tax,' she told the FT.

Tax experts in Italy are predicting that there will be a substantial diversification into BTPs following the rule change, and a narrowing of yield spreads.

According to Ms Cannata, the only foreign investors who will not qualify for the forthcoming exemption will be those who reside in jurisdictions which are considered as tax havens by the Italian authorities.

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