The US-Italy income tax treaty

By Brent Chudoba, editor Updated September 15, 2026

Under the US-Italy income tax treaty, the most the paying country can withhold from an ordinary investor is 15% on dividends, 10% on interest and 0% to 8% on royalties depending on what is licensed. Some recipients and some kinds of payment get a different rate, and the table below lists each one. Without a treaty, US-source dividends and royalties paid to a nonresident are withheld at 30%, while the tax code already exempts most portfolio and bank-deposit interest whether or not a treaty applies.

The treaty has generally applied since 2010. It also decides residency when both countries claim you, and assigns who taxes pensions and Social Security. It does not generally stop the US taxing its own citizens.

What are the US-Italy treaty withholding rates?

US-Italy treaty withholding rates and who qualifies
Income	Rate cap	Who gets this rate, and where the treaty says so
Dividends	15%	Anyone not in a category below, including an ordinary individual investor (Article 10(2)(b))
Dividends	5%	a company that has owned at least 25 percent of the voting stock of the company paying the dividend for a 12-month period ending on the date the dividend is declared (Article 10(2)(a))
Dividends	0%	a qualified governmental entity of the other country (a governing body of that country or of its subdivisions or local authorities, an entity wholly owned by one that does no commercial business, or a government-service pension fund of either that does no commercial business, plus named bodies such as the central banks), holding directly or indirectly less than 25 percent of the voting stock of the company paying the dividend (Article 10(8))
Interest	10%	Anyone not in a category below, including an ordinary individual investor (Article 11(2))
Interest	0%	a qualified governmental entity of the other country (a governing body of that country or of its subdivisions or local authorities, an entity wholly owned by one that does no commercial business, or a government-service pension fund of either that does no commercial business, plus named bodies such as the central banks), holding directly or indirectly less than 25 percent of the capital of the payer (Article 11(3)(a))
Interest	0%	a resident of the other country receiving interest on a debt guaranteed or insured by a qualified governmental entity of either country (Article 11(3)(b))
Interest	0%	interest on a sale on credit of goods, merchandise or services by one enterprise to another (Article 11(3)(c))
Interest	0%	interest on a sale on credit of industrial, commercial or scientific equipment (the Technical Explanation notes this one need not be between enterprises) (Article 11(3)(d))
Royalties	5%	royalties for the use of, or right to use, computer software or industrial, commercial or scientific equipment (Article 12(2)(a))
Royalties	8%	all other royalties, including patents, trademarks, designs, secret formulas or processes, know-how, and films and TV or radio broadcasting material (Article 12(2)(b))
Royalties	0%	royalties for a copyright of a literary, artistic or scientific work, excluding software, films and broadcasting material; taxable only in the owner's country of residence (Article 12(3))

The cap applies to income paid from one country to a resident of the other, and each treaty conditions it on that resident being the real recipient rather than a conduit; the article cited beside each rate is the one that sets the condition. Which document sets each rate today: dividends, 1999 Convention, Article 10(2) and 10(8). The Protocol signed the same day does not change these rates, and IRS Table 3 (updated through 26 September 2025) lists no later Italy protocol.; interest, 1999 Convention, Article 11(2) and 11(3). The Protocol signed the same day adds only the REMIC carve-out in Protocol Article 1(11); IRS Table 3 lists no later protocol.; royalties, 1999 Convention, Article 12(2) and 12(3). The Protocol signed the same day does not change these rates, and IRS Table 3 lists no later protocol..

What else changes the rate?

These are edge cases. If you hold ordinary shares, bonds or a copyright, skip to the next section.

Dividends: Individuals always get 15%; the 5% rate is for companies only. The Treasury Technical Explanation says indirect ownership through other corporations and non-voting shares do not count toward the 25%. The 1984 treaty used different thresholds (5% above 50% ownership, 10% at 10% or more), so older material quoting those is out of date. US RIC dividends never get 5% and are capped at 15%; US REIT dividends get the 15% cap only if the owner is an individual holding not more than 10% of the REIT, or holds not more than 5% of a publicly traded class, or holds not more than 10% of a diversified REIT, and otherwise get no treaty cap (10(9)). The branch profits tax is capped at 5% (10(6) and 10(7)). A main-purpose anti-abuse test (10(10)) and the limitation on benefits in Protocol Article 2 also apply. Rates are the same in both directions, but Protocol Article 5 lets tax be withheld at the full domestic rate and refunded on request with an official residency certificate; the 1999 Technical Explanation describes that as Italy's practice at the time and says either country may change its method.

Interest: Excess-inclusion interest from a US REMIC residual interest may be taxed by each country under its own law with no treaty cap (Protocol Article 1(11)). Branch-level excess interest deemed to arise in the US is capped at 10% (11(8)). Protocol Article 3(1) says the treaty never takes away a more favorable exemption under either country's own law. Main-purpose anti-abuse test in 11(9).

Royalties: There is no single ordinary royalty rate: it depends on what is licensed. Rent for industrial, commercial or scientific equipment counts as a royalty under this treaty (12(4)). Main-purpose anti-abuse test in 12(8).

Which country are you a resident of under the US-Italy treaty?

If the US and Italy both treat you as a resident under their own laws, Article 4(2) decides. It works through these tests in order, and stops at the first one that points to a single country:

Where you have a permanent home available to you
If you have a permanent home in both countries, where your personal and economic ties are closer (your centre of vital interests)
If that centre cannot be determined, or you have no permanent home in either country, where you have a habitual abode
If you have a habitual abode in both countries or in neither, the country you are a national of
If you are a national of both countries or of neither, the two tax authorities settle it by mutual agreement

Using the tie-breaker to be treated as a resident of Italy has US consequences: you file Form 1040-NR with Form 8833 attached, and a green card holder of 8 of the last 15 years who makes the claim is treated as having ended US residency. The details are on the hub page.

How does the US-Italy treaty tax pensions and Social Security?

Pensions (Article 18(1)). A private pension or similar payment for past employment is taxable only in the country where the recipient lives, except that a lump-sum or severance payment received after moving, for work done in the old country while living there, is taxable only in the old country (18(3)); government-service pensions follow Article 19(2) instead. The saving clause still lets the US tax a US citizen living in Italy on a pension.

Social Security (Article 18(2)). Social security paid by one country to a resident of the other is taxable only in the country where the recipient lives (Treasury's explanation says this includes US tier 1 Railroad Retirement). The saving clause still lets the US tax US social security paid to a US citizen living in Italy, unless that person is also an Italian citizen, in which case only Italy may tax it (Protocol Article 1(2)(a)).

Does the treaty stop the US taxing its own citizens?

Generally no. The saving clause (Article 1(2)) keeps that right. Each country may tax its own residents (as decided under Article 4) and its citizens as if the treaty did not exist, and Protocol Article 1(1) extends this, for 10 years, to a former US citizen or long-term resident for whom avoiding tax was one of the principal purposes of giving up that status.

The exceptions: Article 1(3)(a) keeps, for everyone, correlative transfer-pricing adjustments (9(2)), alimony and child support (18(5)), cross-border pension contributions (18(6)), foreign tax credit relief (23), non-discrimination (24) and mutual agreement (25); Article 1(3)(b) keeps government service (19), professors and teachers (20), students and trainees (21) and diplomats (27) only for people who are neither citizens of, nor have immigrant status (a green card, in the US) in, the taxing country; Protocol Article 1(2) also keeps the social security rule in 18(2) for a resident of the other country who is a national of that country even if also a national of the paying country, and the partner credit in Protocol Article 4.

What does the treaty say about students?

Article 21. A student or business trainee who was resident in the other country immediately before the visit and is in the host country only for education at a recognized school or for training is not taxed by the host country on payments for maintenance, education or training that come from outside the host country; in the US the school must be accredited (Protocol Article 1(17)).

What do people most often get wrong about this treaty?

The treaty in force is the 1999 Convention and its same-day Protocol, in force 16 December 2009 and effective for tax withheld on amounts paid from 1 February 2010 (other taxes from 1 January 2010). It replaced the 1984 treaty, whose dividend tiers were different. Readers most often miss four things: the 5% dividend rate needs a company holding at least 25% of the voting stock for 12 months, not the 10% common elsewhere; royalties have three rates (0, 5 and 8) depending on what is licensed; US social security paid to a US citizen living in Italy stays taxable by the US unless that person is also an Italian citizen; and the treaty allows tax to be withheld at the full domestic rate first, with the investor claiming a refund using an official residency certificate. IRS Table 1 (Rev. May 2023) prints rates that match the treaty (15 and 5 dividends, 10 interest, 5 equipment and 8 other royalties, 0 copyrights, 0 pensions, 0 social security), but differs in places: it cites interest as Article 12(2) (the treaty is 11(2)) and the royalty exemption as 12(2) (it is 12(3)); its general footnote b says direct dividend rates generally need 10% ownership, while Italy requires 25% for 12 months; and its footnote h says 'industrial, commercial, or scientific property' where the treaty says equipment. The IRS documents page also labels italypro.pdf as the 1984 technical explanation, but it is the 1999 one.

How do you claim the treaty rate?

Give the US payer Form W-8BEN naming Italy as your country of residence, before the payment. Many countries ask a US resident for Form 6166, a US residency certificate requested on Form 8802, before they apply the lower rate on their side. Both, with the fees and who can get them, are covered on US tax treaties by country.

Sources

Every rate and article on this page was read in the treaty text and its protocols, then checked a second time by a separate review of the same documents, on September 15, 2026.