Italy Tax Agency Clarifies Tax Withholding Reallocation After Conversion to Professional Limited Liability Company

The Italian Revenue Agency March 26 issued Letter No. 85/2026, clarifying rules on reallocating withholding tax credits after the conversion of a professional association (PA) into a professional limited liability company (PLLC). The taxpayer, a PA, earned income subject to 20 percent withholding tax before converting a PLLC, with its income qualifying as business income following the conversion. The taxpayer sought clarification on whether it could use withholding tax credits related to the pre-conversion period after the conversion. Upon review, the Tax Agency clarified that: 1) the members must first offset withholding tax credits against individual income tax liabilities in ...