Italy: Rules Governing the Taxation of Intra-Group Dividends Paid by a German Subsidiary Company to an Italian Parent Company

The three decisions discussed in this contribution concern the application article 24(2)(b) of the Germany-Italy Income and Capital Tax Treaty (1989), which provides that dividends paid by German subsidiaries to their Italian parent companies shall be excluded from the Italian tax base. In particular, the Italian Supreme Court dealt with the following issues of interpretation: (i) whether that exclusion is implicitly subject to the condition that those dividends are taxed in Germany upon distribution; and (ii) whether that provision should be regarded as abrogated due to the entry into force of the EU Parent-Subsidiary Directive (implemented by Italy through a domestic provision exempting 95% of the dividends received by resident parent companies and paid by their domestic or foreign subsidiaries).