An instruction from the Italian Revenue Agency for all Italian banks to withhold a 20 percent tax on all payments from abroad received by Italian individual taxpayers, has been withdrawn with effect from 1 February 2014 as it is being examined by the European Commission.
The withholding tax was to be applied on all incoming payments to an individual taxpayer’s personal accounts unless the taxpayer could demonstrate that the amount being received was not income. The taxpayer would need to certify that the payment did not constitute income deriving from investments or other financial assets held abroad. The European Tax Commissioner was aware of the new Italian measure and was concerned that the withholding tax might violate European Union principles of non-discrimination and the free movement of capital.
The Italian Ministry of the Economy and Finances has indicated that the imposition of a withholding tax is now unnecessary, because the availability of cross-border information on income from foreign sources is becoming more widespread, following moves by the United States in arranging inter-government agreements, and by the OECD in organizing a Common Reporting Standard for the automatic exchange of tax information.
