Italy bank tax on foreign income suspended until 1 July

Italy bows to foreign and domestic protests

After a week of rumours and uncertainty the controversial 20 per cent withholding tax on all income transferred from abroad into personal bank accounts in Italy has been suspended until 1 July. The withholding tax came into effect on 1 February, catching not just individuals but also many banks unawares.

Now the ministry of the treasury has issued a statement that all money subjected to the tax since 1 February must be repaid immediately, with interest.

However the regulation cannot be finally binned until the provision, which dates to December 2013, has been revoked. According to the announcement from the Agenzia delle Entrate this is a job for the new government.

The regulation applied to remittances of income of all residents in Italy – whether Italians or foreigners – hitting those with income from investments abroad, as well as pensions and income legally earned abroad, whether already taxed at source or not. Only those who could provide evidence to the banks that the money remitted was capital rather than income were exempt.

The regulation has been suspended for the time being on the grounds that it is no longer necessary because of the improved exchange of information on tax matters and cross border money flows, especially across Europe and with the United States.

It is understood that opposition to the regulation was raised both abroad and within Italy, especially from the European Commission, which raised questions about whether or not it infringed the free flow of goods and money across the EU.

For details of the announcement