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UK funds exempt from withholding interest from medium to long-term financing provided by firms

The Italian Revenue Agency provided clarifications on the exemption from the withholding tax on interest from medium-long-term financing.

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With Reply n. 125, the Italian Revenue Agency provided clarifications on the exemption from the 26% withholding tax on interest arising from medium-long-term financing granted by companies regulated by Article 26, paragraph 5-bis DPR 600/73.

The Italian Revenue Agency also takes up what has been clarified in Resolution n. 76/2019 for which the exclusion of the withholding tax operates in compliance with the national banking legislation that regulates the business reserve for the provision of loans to the public in order not to create a competitive disadvantage for those national operators who, unlike the foreign ones, require a prior authorization to perform that type of activity.

In addition, foreign institutional investors must be established in the so-called White List countries (it is recalled that due to Brexit, the United Kingdom has been included among the “collaborative” countries).

In the United Kingdom, the establishment and operation of an unregulated collective investment fund is considered to be a regulated activity and it is for this reason that, in order to accomplish that activity legally, the fund must be managed by an authorized entity.

On the basis of this consideration and assuming that the Fund is established in a country allowing for an appropriate exchange of information, the Italian Revenue Agency has qualified it as an institutional investor within the meaning pursuant Article 26, paragraph 5-bis of DPR 600/73 and therefore can benefit from the exemption from the 26% withholding tax.

Regulatory Framework

Reply n. 125/2021

Reference (Italian only)

Resolution n. 76/2019

Reference (Italian only)

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