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Brussels, 9 January 2007

Taxation of interest and royalty payments: The Commission requests Italy to implement the Community Directive correctly

The European Commission has sent a formal request to Italy to ask it to implement correctly the Council Directive 2003/49/EC of 3 June 2003 on a common system of taxation applicable to interest and royalty payments made between associated companies of different Member States. The request is in the form of a Reasoned Opinion, the second stage of infringement proceedings provided for in the Treaty (Article 226). If Italy does not reply satisfactorily to the reasoned opinion within two months the Commission may refer the matter to the European Court of Justice.

The aim of Directive 2003/49/EC is to abolish taxation of interest and royalty payments made between associated companies of different Member States in the Member State at source and thereby to ensure the equality of tax treatment between national and cross-border transactions.

By the legislative decree n°143/2005 implementing the Directive, Italy has restricted the scope of the application of the Directive's provisions on interest and royalty payments accrued (having become payable) on or after 1 January 2004. By this, Italy aimed to prevent fraud and tax evasion in cases where payments of interest and royalties (which had become payable before the entry in force of the Directive) were intentionally delayed in order to benefit from the exemption under the Directive.

The Commission considers that the relevant Italian provisions, excluding the benefit of the Directive to any interests and royalty payment having become payable before 1 January 2004, are disproportionate and go beyond what is necessary to achieve their legitimate purpose. The argument put forward by the Italian authorities that this non-respect of the directive had only limited impact (i.e. only with regard to the initial period of application of the Directive) has not been considered as a valid justification.

Commission case's reference number is 2006/4136.

For more information on the Interest and Royalties Directive, see:

New: For the press releases issued on infringement procedures in the taxation or customs area see:

For the latest general information on infringement measures against Member States see:

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