Investing in Italy through European holding companies: a guide for international investors.
Updated: Mar 18
Italy continues to be a highly attractive destination for international investors active in manufacturing, real estate, infrastructure, and emerging technologies. The presence of high-quality family businesses, often lower valuations than other European markets, and a highly specialized industrial base make the country a fertile ground for investment.
However, the Italian tax and corporate system presents complexities that require careful planning. For this reason, many foreign investors choose to structure their operations through European holding companies , i.e., intermediate companies established in European Union jurisdictions that serve as investment vehicles for Italian companies.
This structure optimizes financial flows, reduces tax risks, and facilitates the governance of shareholdings.
Why use a European holding company
Using a European holding company is a well-established practice in cross-border investment transactions. The objective is not only fiscal, but also strategic and operational.
A holding company established in a European Union country can:
Centralize investments in multiple Italian or European companies;
Optimize the distribution of dividends between group companies;
Facilitate future exit transactions (sale of shareholdings);
Manage intragroup financing and capitalizations.
From a tax perspective, European legislation – in particular the Parent-Subsidiary Directive (2011/96/EU) – allows, under certain conditions, the elimination or reduction of withholding tax on dividends distributed between companies resident in the European Union.
This means that dividends distributed by an Italian company to a European holding company may be exempt from withholding tax , provided that the holding company owns at least 10% of the subsidiary and the stake is held for at least one year.
The most used European jurisdictions
International investors frequently use certain European jurisdictions as investment platforms for Italy. Among the most common are:
Luxembourg
Luxembourg is one of Europe's leading hubs for investment funds and holding companies. Stable tax regimes, a vast network of double tax treaties, and a solid financial infrastructure make the country particularly attractive.
Luxembourg holding companies are often used in private equity or real estate transactions.
Netherlands
The Netherlands has historically played a central role in international holding structures thanks to its extensive tax treaty network and stable legal system.
The Dutch structure is particularly appreciated for the management of dividend and royalty flows.
Ireland
Ireland is often used for structures with a strong technological or financial component, thanks to a competitive tax environment and efficient corporate regulation.
Malta or Cyprus
These jurisdictions can be used in specific international investment transactions, especially when investors come from non-EU countries and intend to take advantage of particularly favorable tax treaty networks.
The tax regime in Italy
When a European holding company invests in an Italian company, several aspects of the Italian tax system must be considered.
Dividends
If the holding meets the requirements of the Parent-Subsidiary Directive, dividends distributed by the Italian company to the European holding company are eligible for exemption from the 26% withholding tax normally applied to non-residents.
In the absence of European requirements, the rates established by the double taxation agreement between Italy and the holding company's country apply.
Capital gains
The sale of shares in Italian companies by a European holding company may be exempt from taxation in Italy if the double taxation agreement grants the holding company's country of residence the exclusive right of taxation.
This aspect is particularly relevant in private equity transactions, where the final objective is the sale of the stake.
Interest on intragroup loans
European holding companies can also finance Italian companies through loans. Interest paid by the Italian company may be subject to withholding tax, but in many cases this tax can be reduced or eliminated thanks to European directives or tax treaties.
The theme of economic substance
In recent years, European tax authorities have intensified their scrutiny of corporate structures lacking real economic substance.
To benefit from the tax advantages provided by European directives and double taxation treaties, the European holding company must not be a mere "letterbox company" but have an effective economic presence in the country of establishment.
Substantive elements may include:
presence of resident administrators;
offices and operational infrastructure;
real decision-making functions;
effective investment management.
In the absence of such elements, the tax authorities could challenge the application of tax benefits on the basis of anti-abuse rules.
Governance and investment structuring
The presence of a European holding company also allows for more efficient investment governance.
Among the most used solutions are:
investment holding companies that control several Italian operating companies;
multi-level structures , with a European holding company and local vehicles;
co-investment vehicles for funds or family offices.
These structures allow for clear regulation of investor relationships, governance rights, and profit distribution methods.
Conclusions
Investing in Italy through a European holding company is a widely used solution by private equity funds, family offices, and institutional investors.
If structured correctly, this architecture can offer significant benefits in terms of tax efficiency, operational flexibility and governance management.
However, the effectiveness of these structures depends on careful planning that takes into account Italian tax regulations, European directives, and the most recent developments in economic substance and anti-abuse regulations.
For international investors interested in the Italian market, designing the corporate structure is therefore a fundamental step in ensuring long-term stability, efficiency, and legal certainty.
About the Author
Edoardo Tamagnone is a lawyer and partner at the law firm Tamagnone Di Marco Avvocati Associati. He focuses on international taxation, investment structures, and wealth planning for investors, family offices, and businesses with cross-border operations.
He works in Turin and international contexts, focusing on the intersection of law, economics, and global capital.
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