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HMRC internal manual

International Manual

HM Revenue & Customs
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DT Agreements: Italy - Income from a UK source paid to a resident of Italy

UK dividends paid to a resident of Italy - direct investor

See INTM343540 for an explanation of ‘direct investor’.

The Convention (see Article 10) provides that a direct investor company which is the beneficial owner of a UK dividend is entitled to a tax credit equal to half the tax credit to which a UK individual would be entitled. And for the payment of the excess of that tax credit after retention of 5% of the aggregate of the UK dividend plus the half tax credit. Examples of the way in which relief is calculated can be found at INTM343540.

The Convention also requires the dividend to be subject to tax in Italy. ‘Subject to tax’ is explained at INTM162090 and INTM350550.

Article 10(5) provides for relief not to be available if it cannot be shown that the shareholding was acquired for bona-fide commercial reasons or in the ordinary course of making or managing investments.

Dividend Stripping

The anti-dividend stripping provisions (see Article 10(9)) apply where the Italian company owns 10% or more of the class of shares from which the dividend is paid.

No relief is available where

  • The dividend can have been paid only out of profits or other income which the paying company earned in a period ending 12 months or more before the date the dividend was paid.


  • The shares on which the dividend was paid have not been held continuously for 12 months up to the date on which the dividend was declared.

There is a question on the dividend claim forms to help you identify these claimants.