The Italian Tax Authorities issued Resolution No. 84/E on 29 September 2016, providing clarifications on the tax treatment of qualifying interest on medium or long-term loans, following the amendments introduced by Law Decree No. 91 of 24 June 2014.
Generally, interest income paid to non-resident banks with no permanent establishment in Italy is subject to a final withholding tax at a rate of 26% or at a reduced rate when a tax treaty applies. However, provided that certain regulatory provisions are respected, no withholding tax is levied on interest on medium or long-term loans granted to enterprises, if the lender is any of the following:
-a bank established under the law of an EU Member State;
-an entity listed in article 2(5), No. 4 to 23, of Directive 2013/36/EU;
-an insurance company established and licensed under the law of an EU Member State; or
-an institutional investor, whether or not subject to tax, set up in a country included in the Italian white list and subject to regulatory supervision in its home country.
Italian Tax Authorities clarified that such interest income is not subject to tax in Italy and, therefore, qualifying non-resident lenders are not required to submit a tax return.