Law Decree No. 91 of June 24, 2014, converted into law by the Italian Parliament on August 7, 2014, has broadened the scope of the withholding tax exemption applicable to eligible nonresident investors (i.e., investors resident in a white-listed country and with no permanent establishment in Italy) on certain debt-like securities.
Before the enactment of the new rules, nonresident holders could benefit from a withholding tax exemption on interest paid on the following securities:
- Bonds, bond-like securities, and commercial papers that were issued by Italian-resident banks,regardless of whether these securities were listed on a regulated market;
- Bonds, bond-like securities, and commercial papers, whether listed or not, that were issued by resident companies whose shares were traded on regulated markets or multilateral trading facilities of an EU Member State or an EEA country included in the Italian white list (i.e., Iceland and Norway); and
- Bonds, bond-like securities, and commercial papers that, although issued by nonlisted resident companies, were listed on a regulated market or a multilateral trading facility of an EU Member State or an EEA country included in the Italian white list (i.e., Iceland and Norway).
The Law Decree has added a new item to the list of exemptions—interest on bonds, bond-like securities, and commercial papers issued by nonlisted resident companies will be exempt from Italian withholding tax if the security holder is a "qualified investor" under article 100 of the Italian Unified Financial Act (e.g., banks, broker-dealers, investment funds, pension funds, etc.), regardless of whether the security is listed. It is not clear whether the exemption is available only in the event the entire bond issuance is subscribed to by "qualified investors."
Finally, the Law Decree has introduced a blanket withholding tax exemption that applies to interest deriving from any type of bond, bond-like security, and commercial paper and paid to undertakings for collective investment, whether set up in Italy or in another EU Member State, if: (i) their units are entirely held by "qualified investors"; and (ii) more than 50 percent of their assets are the aforesaid debt securities and commercial papers.