A Luxembourg or Dutch holding still gives Italian groups and families real advantages, but Italy tests it on four fronts: whether it is really managed abroad, whether it is a CFC, whether it is the beneficial owner of Italian dividends, and whether it abuses the directive. Italian courts have ruled against conduit holdings, and the 2024 residence rules look at where decisions are really taken.
Why Italian groups, families and funds use Luxembourg and the Netherlands
Luxembourg holds a large share of the private equity and family holdings that own Italian companies, and the Netherlands is home to the European holdings of several Italian industrial groups. The reasons are familiar: a neutral EU company for co-investors, access to the EU directives, investor-friendly vehicles in Luxembourg, a flexible 5% participation exemption in the Netherlands.
Italy is also one of the most active countries in Europe at challenging these structures. Its courts have been ruling on Luxembourg and Dutch holdings for years, its residence rules for foreign companies were rewritten in 2024, and its CFC rules reach EU holdings. A structure that works for a German or American owner can fail for an Italian one.
Owner or target
Italian company, family, or Italian operating companies owned by a fund.
Holding
Owns, finances and sells; must be resident and real where it says it is.
The reviewer
Residence, CFC, withholding and beneficial ownership, often all at once.
Esterovestizione: is the holding really foreign?
- New residence rules since 2024. A company is Italian-resident if, for most of the year, its strategic decisions (sede di direzione effettiva) or its day-to-day management (gestione ordinaria) take place in Italy, whatever its registered seat. Circular 20/E of 2024 looks at substance, not formalities.
- The presumption still applies. A foreign holding that controls Italian companies and is either controlled by Italian residents or run by a board with an Italian-resident majority is presumed Italian-resident. The holding must prove otherwise.
- The family holding run from Milan. Board meetings minuted in Luxembourg but decided at the family's office in Milan are the classic case: the holding becomes Italian, with Italian tax on all its income and penalties for undeclared years.
In Italy the question is not whether the Luxembourg company exists. It is whether it is really managed in Luxembourg, or only signs there.
Dividends from Italy to the holding: 0%, 1.2% or 26%
| Situation | Italian withholding |
|---|---|
| EU parent, 10% or more held 12 months, subject to tax, beneficial owner | 0% (Parent-Subsidiary Directive) |
| EU or EEA company not meeting the directive conditions | 1.2% |
| Conduit holding, benefit denied | 26%, or the rate of the treaty with the real owner's country |
| Royalties to non-residents | 30% domestic, reduced by treaty or the EU directive |
Italian courts look closely at who really owns the dividend. The Supreme Court in 2024 (Cass. 23628/2024, a Dutch holding) set out three tests: real activity, freedom to dispose of the money, and a business purpose. In 2025 a Lombardy tax court treated Luxembourg holdings with a shared address, no staff and dividends passed straight to a US owner as conduits and looked through them. Earlier, the Supreme Court had refused a refund to a Luxembourg parent because the dividend was tax-exempt in Luxembourg (Cass. 32255/2018), a ruling much criticised but never forgotten.
Italian CFC rules and EU holdings
- Two tests since 2024. A controlled foreign company is caught if its effective tax rate is below 15% and more than a third of its income is passive. EU companies are not excluded.
- A pure holding is passive. Dividends and gains are passive income, and a holding that receives exempt dividends may show a low effective rate. How exempt income counts in that rate needs to be checked case by case.
- The way out is substance. A company with real economic activity, staff, premises and assets is outside the rules; an advance ruling can confirm it.
- Or pay 15%. Italy offers an optional 15% substitute tax on the CFC's profits, binding for three years, if the accounts are audited.
- Individuals too. The CFC rules also apply to Italian-resident individuals who control a foreign holding.
Italy–Luxembourg and Italy–Netherlands
| Italy–Luxembourg (1981) | Italy–Netherlands (1990) | |
|---|---|---|
| Dividends from Italy | 15% | 5% / 10% / 15% depending on the holding |
| Interest from Italy | 0% / 10% | 0% / 10% |
| Royalties from Italy | 10% | 5% |
| Dividends to an Italian company | 0% under Luxembourg's domestic exemption | 0% under the Dutch exemption or the directive |
| Principal purpose test | Not yet: Italy signed the MLI in 2017 but had not ratified it by 2025 | Same |
| Anti-abuse anyway | Italian general anti-abuse rule and EU anti-abuse principles | Same |
Within the EU, the directive usually matters more than the treaty. The treaty becomes decisive when the directive is denied, which is exactly when a structure is under review. Italy is not on the Dutch list of low-tax jurisdictions.
When the money comes back to Italy
| Recipient in Italy | Treatment in 2026 |
|---|---|
| Italian company | 95% of dividends and gains exempt (1.2% effective at 24%), if the participation exemption conditions are met |
| Italian-resident individual | 26% on dividends and gains; Luxembourg or Dutch withholding is generally not fully recoverable against it |
| Foreign financial assets of individuals | IVAFE 0.2% a year and annual RW reporting |
| New residents on the flat tax | EUR 300,000 a year from 2026 covers foreign income, with limits on gains in the first five years |
2026 also showed how fast Italian rules move: the budget law limited the dividend and capital gains exemptions to stakes of 5% or EUR 500,000, and a decree repealed the change retroactively three months later.
Check your structure
Six questions; the check lists the exposures, not the fixes.
Check your Italian–Luxembourg or Dutch structure
Six questions. You see the Italian rules that apply and where the structure is exposed.
A holding run from Italy is Italian, whatever its seat.
Pass-through holdings lose the 0% and face 26% or look-through.
Low effective tax plus passive income: substance or 15%.
But the Italian anti-abuse rule and EU law apply anyway.