Clarity for foreign funds tax.

The article clarifies the policy on the taxation of foreign funds investing in Italy. With Ruling 167/E of April 21, 2008 (Ruling 167), the Italian tax authorities clarified the requirements for the treaty entitlement of foreign pension funds. The conclusions reached by the tax authorities are substantially in line with the commentary to the OECD Model Convention (OECD MC). According to the domestic provisions, dividends distributed to non-resident entities are ordinarily subject to a 27% withholding tax. In order to assess who is the effective beneficiary of the income, the tax authorities focused their attention on the issue of whether or not the fon commun de placement (FCP) qualifies as a resident entity under Article 4 of the Luxembourg-Italy tax treaty.