Italy's Parent-Subsidiary Directive relates to the tax treatment of dividends paid by companies fiscally resident in Italy, to companies or bodies with direct holdings of at least 20%, and resident status in the EU.

Article 27-bis of the D.P.R. 600/1973 governs the so-called 'Parent-Subsidiary' Directive (no. 90/435/EC) related to the tax treatment of dividends paid by companies fiscally resident in Italy, to companies or bodies with direct holdings of at least 20%, that reside in one of the European Union member states.

This Directive calls for the elimination of the double taxation on dividends that the subsidiary company distributes to a parent company, having its registered office within the EU. According to this regulation, if specific conditions are met, said dividends are exempt from withholdings and are not subject to withholding tax as established in article 27, paragraph 3, of the D.P.R. 600/73.


The regulation, in fact, establishes two methods to avoid the application of withholding tax on dividends paid to foreign companies. The first method is the reimbursement regime governed by article 27-bis, paragraph 1, of the D.P.R. 600/1973. It establishes that the residing subject, meeting the conditions for the 'Parent-Subsidiary' Directive, applies the withholding tax at a rate of 1.20%. Once the dividends have been received, the foreign subject will have the right to request reimbursement of the amount withheld.

The second method is the exemption regime governed by article 27-bis, paragraph 3, of the D.P.R. 600/1973. According to this method once the conditions established for the application of the Directive are met, the residing subject, on request of the non-residing subject, does not apply the withholding tax at the rate indicated in article 27, paragraph 3-ter, of D.P.R. 600/1973.

In order to apply the exemption of the withholding tax for dividends paid to companies or economic bodies resident in a foreign country, article 27-bis paragraph 3 establishes that the following conditions must be met:

  1. Ownership of holdings at a rate no less than 20% of the capital of the company distributing the profit, for at least one interrupted year
  2. The foreign subject matches one of the legal forms listed in attachment 'A' of the 90/435/EEC Directive
  3. The foreign subject's residence, for tax purposes, is in one of the European Union Member States
  4. Regimentation of the foreign subject, in its own state of residence, to one of the taxations listed in the aforementioned Directive, as long as the subject is not benefiting from optional or exemption regimes.


For the foreign company (parent) to take advantage of this regime, it must submit to the company resident in Italy (subsidiary) a specific request not to apply the withholding tax within the date of payment of the dividends.

It is necessary to provide the following documentation, which must be held and archived at the subsidiary company's office:

  1. Certification issued by the foreign tax authorities where the parent company is resident, certifying that the latter meets the aforementioned requirements necessary to be eligible for exemption
  2. A self-certification confirming the period of ownership of the holding, which must be no less than one year, and proof of meeting the requirement of being the effective beneficiary of the dividends.

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When applicable to their specific situation, TMF Italy can provide detailed information to clients on how to benefit from such a tax regime.

For Italian subsidiaries with a registered office at TMF Group, we can collect the documentation produced by the foreign mother company, and keep it in the corporate records of the Italian subsidiary.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.