On 19 November the European Court of Justice, in case C-540/07, ruled that the Italian practice of withholding tax applied on dividends which are distributed to shareholders established in EU Member States constitutes an unjustified restriction on free movement of capital, prohibited by Article 56, par. 1, EC Treaty. The same rule does not apply to EEA Member States (Norway, Iceland, Liechtenstein), as withholding tax where applied to shareholders established there does not breach Article 40 EEA Agreement on free movement of capital, as this restriction is justified by the overriding reason which is in the public interest regarding the fight against tax evasion.
The 19 November judgment concerns the dividend withholding taxes levied in fiscal years prior to the modification adopted by the Italian Government, as of 1 January 2008, which created a reduced withholding tax regime to comply with EC Treaty free movement rules. As a consequence, non resident shareholders may file a reimbursement claim for withholding tax applied on dividends received before 2008, provided that the four-years forfeiture term generally applicable to tax reimbursement claims is not expired. Given the approaching year-end, urgent action in such case is required.