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San Marino Off Italian Blacklist

by Ulrika Lomas,, Brussels

05 August 2013

The publication in the Italian Official Gazette, with an entry into force of July 31, 2013, of the double taxation agreement (DTA) between Italy and San Marino signifies that San Marino will be taken off the "black list" of countries Italy considers to be tax havens.

San Marino has signed DTAs or tax information exchange agreements with a number of other countries, including, most recently, Canada, South Africa and China, and has been able to change its internal regulations to guarantee transparency within its economic system. Its Government has, for some time, been working to reduce the evasion of Italian taxes through its territory and has irrevocably chosen the path of international tax transparency and collaboration.

Within successive anti-tax evasion actions taken by Italian governments, San Marino has remained on the Italian black list. There were substantial cash outflows from San Marino's banks, reducing their financial stability, but Italy had seemed to be delaying ratification of the DTA, which is actually the renegotiation of an original never-ratified 2002 agreement, with an added protocol for the exchange of tax information, after its signature in June last year.

However, the last Italian Government led by Mario Monti picked up the matter back in December last year, and, although there were delays because of the indecisive Italian general election in February, and then the forming of a new Government, meaning that its ratification was further delayed, the Letta Government has managed to see it through the parliamentary process.

Apart from the most recent internationally-agreed framework for the exchange of tax information and the overcoming of bank secrecy, which will become operative immediately, the DTA also contains provisions for withholding taxes on dividends, royalties and interest that will be effective from January 1, 2014.

In fact, the agreement reduces the withholding tax on dividends to zero (currently 20 percent) in certain circumstances, while the tax on dividends, interest and royalties cannot, in all cases, exceed 15 percent, 13 percent and 10 percent, respectively.

Finally, another new provision introduces the obligation of San Marino's Government to monitor the movement of capital between Italy and San Marino, as well as the setting up of companies that have an interest, for example, in the profits or dividends of Italian companies.

TAGS: tax | investment | tax information exchange agreement (TIEA) | double tax agreement (DTA) | royalties | law | banking | offshore | agreements | offshore banking | withholding tax | Italy | dividends | regulation | San Marino

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