Capital Gain realised under the PEX regime both in Italy and in France – Deduction of taxes paid in France

The response to ruling request No. 101 issued by the Italian Revenue Agency on 15 April 2025 confirmed the application of Article 165(10) of the TUIR to the tax paid in France in connection with the capital gain realised on a shareholding in a French company held by an Italian-resident company. This gain is taxable in both countries pursuant to the Protocol to the Double Tax Convention, albeit partially, due to the application of the participation exemption both in Italy (Article 87 of the TUIR) and in France.

Specifically, pursuant to Article 165(10) of the TUIR, where foreign-source income contributes only partially to the calculation of the total taxable income, the foreign tax must likewise be proportionally reduced.