Foreign dividends are where domestic tax rules and tax treaties collide. A 2022 ruling by Italy’s Supreme Court, the Corte di Cassazione, settled one important point in taxpayers’ favor: Italian residents can, in principle, claim a credit for foreign tax withheld on dividends that Italy taxes at the flat 26% rate.
This article explains the ruling, what it means in practice and what you can do about past years. It was reviewed in October 2026. It is general information, not tax advice, and the answer for you depends on the treaty with the country that paid the dividend.
A note for US citizens: the United States taxes its citizens wherever they live, so a US citizen living in Italy also has US filing obligations and its own foreign tax credit rules. The Italian side described here still applies, but the full picture needs an adviser who knows both systems.
How foreign dividends are taxed
When an Italian resident receives a dividend from a foreign company, it is usually taxed twice: first in the country where the company is based (the source country), then in Italy, the country of residence.
In the source country, the company normally withholds part of the dividend as tax. A double tax treaty often caps this, commonly at 15%. In Italy, dividends from ordinary (non-qualifying) shareholdings are then taxed at a flat 26%, either withheld by an Italian bank or broker or declared in your tax return. They are not added to the rest of your income.
What that adds up to
If the source country withholds 15% and an Italian bank then applies 26% to what is left, the total tax is 37.1% of the dividend. If you receive the dividend without an Italian intermediary, the Agenzia delle Entrate’s position is that the 26% is due on the gross amount, and the total rises to 41%.
Why no credit was given
Italy has not normally allowed a credit for foreign tax against the flat 26% tax, because that income is taxed separately from your other income. Many of Italy’s treaties also say no credit is due where income is subject to a final withholding tax at the recipient’s request. In practice, residents paid both taxes in full.
The Supreme Court’s decision
In decision no. 25698 of 1 September 2022, which concerned the Italy-US treaty, the Supreme Court held that the treaty exclusion applies only when the taxpayer chooses the flat-rate tax. Because Italian residents have no choice for these dividends, the foreign tax can be credited against the Italian tax. The court confirmed the same principle in ruling no. 10204 of 2024. The outcome still depends on how each treaty is worded, so the argument is stronger for some countries than others.
What it means in practice
The Italian tax return has no box for claiming this credit against the 26% tax, so the ruling does not simply change how you fill in your return. For future dividends, ask a commercialista to check the relevant treaty and the way your dividends are paid.
For past years, you may be able to claim a refund by filing a request (istanza di rimborso) with the Agenzia delle Entrate for the foreign tax that should have been credited. The request generally has to be made within 48 months of the payment. Refunds are not automatic, the tax office may refuse, and getting one can mean going to the tax courts. Weigh the amount at stake against the cost.
Dividends paid without an Italian bank
If you receive dividends directly or through a foreign bank or broker, the potential refund may be larger, because the 26% was calculated on the gross dividend. If this applies to you, review your past returns with an adviser.
In short
The 2022 ruling gives Italian residents a solid argument for a credit on foreign tax paid on dividends, and a possible route to refunds for recent years. It depends on the treaty, and claiming it takes paperwork and sometimes a dispute with the tax office. Take advice on your own situation before you act.
