Italy Tax Agency Clarifies Deductibility of Swiss Capital Tax Under CFC Regime

The Italian Revenue Agency March 6 issued Letter No. 70/2026, clarifying the deductibility of Swiss capital tax under the controlled foreign corporation (CFC) regime. The taxpayer, an Italian parent company, controlled a Swiss resident subsidiary subject to Swiss capital tax at the cantonal level. The taxpayer sought clarification on whether the Swiss capital tax could reduce the Italian CFC tax due on the subsidiary’s income. Upon review, the Tax Agency clarified that: 1) the overseas tax credit and deduction mechanisms under the CFC regime apply only to overseas income taxes or similar taxes; 2) the Swiss capital tax is a ...