An income tax treaty between the United States and Italy has taken effect after a decade-long delay.
Originally approved by the U.S. Senate in 1999, the treaty officially entered into force Thursday when representatives of the two governments exchanged ratification documents at an event in Rome. The treaty enforcement will improve exchange of information, solidify mechanisms to resolve disputes, and reduce taxes on U.S. businesses operating in Italy.
Provisions of the tax treaty with Italy include:
A limit of 5 percent on source-country withholding tax on certain direct dividends and a limit of 15 percent on source-country withholding tax on all other dividends;
Elimination of source-country withholding tax on certain interest paid to, guaranteed or insured by qualified governmental entities; interest paid with respect to a sale on credit of goods, merchandise, services or industrial, commercial or scientific equipment; and a limit of 10 percent on source-country withholding tax on all other interest;
Elimination of source-country withholding tax on royalties for certain literary, artistic or scientific works; a limit of 5 percent source-country withholding tax on royalties for the use of, or the right to use, computer software or industrial, commercial or scientific equipment; and a limit of 8 percent on source-country withholding tax on all other royalties; and,
A comprehensive limitation on benefits provision.
With respect to taxes withheld at source, the new treaty shall have effect for amounts paid or credited on or after Feb. 1, 2010. For all other taxes, the new treaty will cover taxable years starting Jan. 1, 2010.
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