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Italy Foreign Tax Credit to avoid double taxation


Under Italian tax law, international double taxation is reduced by granting Italian tax residents a credit for taxes paid abroad. The Italian mechanism to avoid double taxation has the features of an ordinary credit method.

Pursuant to Art. 165 of the TUIR where an Italian tax resident derives income that is sourced

abroad and subject to tax therein, to the extent that the same item of income is also subject to tax in Italy in the hands of the same person, then such person is entitled to off-set the taxes levied abroad against his Italian tax exposure.

Furthermore, the Italian tax system also provides for a specific branch exemption regime which can only be applied upon election of the relevant Italian taxpayers.

Italy Foreign Tax Credit

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1. Foreword

2. FTC Requirements

2.1 Foreign Sourced Income

2.2 Foreign Income Taxes

2.3 Final Taxes

2.4 Relevance in determining the overall Italian taxable income

3. FTC calculation

3.1 Foreign Tax Credit Amount

3.2 Differences Between Foreign and Italian Taxes

3.3 FTC and Tax Return

4. Request for data

5. Glossary


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