Intercompany dividends and withholding tax


It has been satisfactorily settled by Dr Ernesto Serraglia, partner of the firm, a very important issue with the Italian Tax Authorities on behalf of a multinational client of ours. The Italian Inland Revenue had claimed that a 15% withholding tax should have been applied to the dividends paid by an Italian company in favour to its parent, a Luxembourg SOPARFI company, on the ground that said Luxembourg parent company was controlled by a Swiss holding company. The opinion of the Tax Authorities was that the Luxembourg company acted as a mere conduit company and that said scheme had been conceived in order not to pay the aforementioned withholding tax. The amount of the dividends was about 10 million €.

In the phase of the negotiation with the Inland revenue ( accertamento con adesione), the tax Authorities have agreed with what stated by Dr Ernesto Serraglia, that is that the concept of conduit company is not applicable since there is no obbligation, on the part of the Luxembourg parent company, to retransfer the dividends to the Swiss holding company further to a written agreement, and there was no evidence of any such agreement.

This claim was originated by an audit by the tax police ( G.d.F) that, through some inspections on the CFO’s emails, found evidence of some contradictory statements which were so interpretated by them.

We must therefore stress the fact that the use of emails to communicate delicate tax and financial matters within a group of companies is a very delicate issue, and therefore we recommend the utmost attention in the use of said emails and on their contents.