With ruling no. 131/2025, the Italian Revenue Agency clarified that, for the purposes of Article 47-bis, paragraph 1, letter b) of the TUIR (Italian consolidated law on income tax), the test of the nominal level of taxation – used to determine whether a foreign tax regime qualifies as preferential in cases of non-controlling shareholdings – must be carried out based solely on the IRES rate (24%), without taking into account either IRAP or withholding taxes applied to dividends payable.
The Revenue Agency clarified that the foreign nominal tax rate should be determined as the applicable tax rate in the country where the subsidiary is located, taking into account only income taxes established under the local tax system, following a simplified approach that refers to the current tax rate in effect under that jurisdiction, as specified in Official Memorandum 35/E issued by the agency in 2016.
In this specific case, the minority participation held by an Italian company (“Applicant”) in a Moroccan company – benefiting from a five-year exemption from income tax and subject thereafter to a tax rate of 8.75% for the subsequent twenty years – was classified as being held in a low-tax jurisdiction, since the rate is less than 50% of the Italian tax rate. Consequently, the dividends received by the Applicant company must be fully taxed in Italy, unless the taxpayer can demonstrate the existence of substantiative economic activity pursuant to Article 47-bis, paragraph 2, letter a), or the absence of an avoidance purpose pursuant to letter b).
The Revenue Agency ultimately excluded the application of the proportional reduction (“falcidia”) to the foreign tax credit pursuant to Article 165, paragraph 10, of the TUIR.
