Italy Tax Agency Clarifies Foreign Tax Credit on Capital Gains Under Participation Exemption Regime

The Italian Revenue Agency April 15 issued Letter No. 101/2025, clarifying the credit, under Section 165(10) of the Income Tax Code, for taxes paid in France on capital gains subject to the participation exemption (PEX) regime. The taxpayer, a foreign-controlled company tax resident in Italy, sold the shares of a French company it wholly owned, to a French company outside the group. The capital gain on the sale was subject to corporate income tax concurrently under both countries’ PEX regimes and the protocol to the 1989 Italy-France DTA. The taxpayer inquired regarding the possibility of a reduction of foreign tax ...