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Italy Withdraws WHT On Inbound Payments

by Ulrika Lomas,, Brussels

20 February 2014

An instruction from the Italian Revenue Agency for all Italian banks, from February 1 this year, to withhold a 20 percent tax on all payments from abroad received by Italian individual taxpayers, has been withdrawn after it was disclosed that it was being examined by the European Commission.

Under the instruction to banks, the tax was to be applied on all incoming payments to an individual taxpayer's personal accounts, unless the taxpayer could demonstrate that the amount being received was not "income." The taxpayer would have had to certify that the payment did not constitute income deriving from investments or other financial assets held abroad.

European Tax Commissioner Algirdas Šemeta's spokesperson Emer Traynor was reported to have confirmed that Šemeta was aware of the new Italian measure and that the concern was whether or not the imposition of the tax violated European Union principles of non-discrimination and the free movement of capital.

However, a decision by the Commission was being delayed because much would have depended on the application of the tax and, in particular, on how practical was the possibility for Italian individuals to avoid the withholding by demonstrating that the payment being received does not constitute part of their income. The Commission would then have needed to evaluate whether the Revenue Agency's measure was "proportionate" or not.

However, immediately after the Commission's investigation became apparent, it was disclosed by the Italian Ministry of the Economy and Finances that the Revenue Agency had withdrawn the instruction.

The Ministry professed that the imposition of a withholding tax was now unnecessary, given that the availability of cross-border information on income from foreign sources was becoming more widespread, following moves both by the United States in arranging inter-government agreements, and by the OECD in organizing a Common Reporting Standard for the automatic exchange of tax information.

TAGS: individuals | tax | business | European Commission | tax information exchange agreement (TIEA) | agreements | withholding tax | Italy | individual income tax | Europe | Tax

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