Italian courts have now provided strong support for the position that non-resident corporate investors can reclaim Italian dividend withholding tax where it exceeded the 1.2% effective burden available to comparable Italian companies. With the 48-month limitation period running from each dividend payment, claims for 2022 dividends are expiring during 2026.
What the Courts Have Decided
A series of recent Italian court decisions, including Corte di Cassazione Decision No. 4761/2026 and the Abruzzo Tax Court of Appeals Decision No. 93/2026, have supported a principle that non-resident corporate investors can use to recover overpaid Italian dividend withholding tax (WHT).
The argument turns on comparability. Before 2026, Italian corporate recipients of domestic dividends effectively paid tax at just 1.2% on those dividends. This was because only 5% of dividend income was included in the 24% IRES corporate tax base, producing an effective rate of 1.2%.
Non-resident investors, by contrast, typically suffered Italian WHT at 26% (the domestic rate) or at a reduced treaty rate of around 15%. Courts have found that charging non-resident corporate investors at rates substantially above 1.2% can be discriminatory where those investors are in a comparable situation to Italian corporate recipients.
The reclaim amount is the difference between the WHT actually withheld and the 1.2% domestic comparator.
Not Just an EU Argument
Critically, recent case law suggests that the discrimination argument can extend beyond EU and EEA investors.. The Abruzzo Court of Appeals decision confirmed that a US company could qualify for the 1.2% effective rate, and similar reasoning has been applied by Italian courts of first instance in further US corporation cases.
This matters because many non-EU institutional investors and asset managers may have assumed they are outside the scope of this reclaim, but the emerging case law says otherwise. The relevant legal basis for the discrimination argument in the US case is Article 63 TFEU (free movement of capital, which can extend to third countries); the Italy–US tax treaty is relevant to the applicable treaty rate, including the 5% rate, but is not the basis for the Article 63 discrimination argument. The Abruzzo decision should nevertheless be viewed as supportive taxpayer authority rather than a settled universal rule for all non-EU corporates. Non-EU corporate investors, including US entities, should therefore assess the opportunity on their own facts and comparability position.
Why 2026 Is the Critical Year
Italy applies a 48-month limitation period to WHT refund claims, running separately from each dividend payment. This means:
Claims relating to 2022 dividends are expiring during the course of 2026, with the deadline calculated separately for each payment
Claims for 2023, 2024, and 2025 dividends remain open but will roll off in subsequent years
The 2026 legislative changes require the forward-looking position to be considered carefully. Decree-Law 38/2026, issued on 27 March 2026, retroactively rolled back the new participation thresholds to 1 January 2026, restoring the prior regime. The Budget Law 2026 therefore should not be described as having definitively closed the gap between resident and non-resident taxation.
The 1.2% reclaim argument is therefore primarily backward-looking. It is a reclaim opportunity for Italian dividends received in 2022 through 2025, not a planning route for future income flows.
Who Should Be Reviewing Their Position
The immediate priority is for non-resident corporate investors who received Italian dividends between 2022 and 2025 and suffered WHT above 1.2%. This includes:
EU and EEA corporate investors — the discrimination argument based on EU free movement of capital (Article 63 TFEU) is well-established
US corporate investors — increasingly supported by recent case law, including the Abruzzo decision, with the Article 63 TFEU argument requiring a fact-specific assessment
Other non-EU corporate investors — worth assessing on a case-by-case basis depending on treaty position and comparability
Asset managers and funds — Italian WHT on portfolio dividend flows can be substantial; however, the comparability analysis may differ materially from that applicable to a corporate shareholder, so the Abruzzo reasoning should not be assumed to apply without separate review
The key questions are: how much Italian WHT was suffered on dividends in the relevant period, and is the investor comparable to an Italian corporate recipient for these purposes?
Practical steps for investors
For investors with potential exposure, the practical steps are:
Identify Italian dividend income received from 2022 onwards and the WHT rate actually applied
Assess comparability: whether the investor is in a situation comparable to an Italian corporate recipient
Quantify the reclaim as the excess of WHT suffered over 1.2% of gross dividends
File protective claims before the 48-month deadline applicable to each individual dividend payment expires
Take specialist advice: Italian WHT reclaim procedure involves filing with the Italian tax authorities (Agenzia delle Entrate), and claims may face administrative resistance before judicial resolution
Given that 2022 deadlines are running now, investors should not wait for certainty on future case law before filing protective claims on their earliest years.
The Bigger Picture
This reclaim opportunity sits within a broader pattern of Italian courts aligning domestic WHT practice with EU free movement principles and treaty non-discrimination obligations. Italian courts have previously ruled in favour of US pension funds on dividend WHT, approved look-through approaches for cross-border investors, and engaged with EU fund equivalence arguments. The 1.2% corporate reclaim is the latest (and potentially the largest in terms of aggregate value) of these developments.
Following Decree-Law 38/2026, the 2026 position should be considered in light of the restoration of the prior participation regime. For the 2022–2025 period, the difference in effective taxation remains the basis for potential reclaim claims, but the strength of those claims depends on the investor’s comparability and the applicable legal basis. The task now is to assess and recover any over-withheld tax before the applicable limitation window closes.
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This article is for general information purposes only and does not constitute legal or tax advice. Investors with Italian dividend income from 2022 onwards should take specific professional advice on whether a reclaim is available and how to file before applicable deadlines.
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