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Italian Digital Service Tax

  • Italy
  • Tax planning and consultancy - Briefings
  • Tax planning and consultancy - Digital tax

14-01-2020

Italian Digital Service Tax        Megahpone

The Italian 2020 Budget Law (re‑)introduced a unilateral Digital Services Tax (“DST”), effective as of January 1st, 2020, that is similar to the one outlined by the EU Commission in its Council Directive proposal (COM (2018) 148 final).

The Italian DST provisions are to be repealed as soon as new rules stemming from international arrangements on how to tax the digital economy will enter into force.

Taxable person

Entities carrying on business activities are subject to the Italian DST as a taxable person if they meet the following two cumulative thresholds (whether on a stand-alone or a consolidated basis), in the calendar year prior to the year in which the taxable revenues are received:

(1)    Worldwide revenues of not less than EUR 750 million; and

(2)    Revenues from digital services (“taxable services”) realized within the Italian territory of not less than EUR 5.5 million.

Taxable services

The Italian DST applies to revenues earned from the supply of the following digital services:

a)     The placing of advertisements on a digital interface targeted at users of that interface;

b)     The making available of a multi-sided digital interface to users which allows such users to find other users and interact with them, and which may also facilitate the sale or exchange of goods or services directly among them; and

c)     The transmission of data collected about users and generated from the users’ activities on digital interfaces.

Digital services outside the scope of the Italian DST

The Italian 2020 Budget Law includes a list of digital services not triggering the Italian DST.

Among others, digital intermediation service as part of direct sales of goods and services from business to consumers, and sales of goods and services via the selling business's website without any intermediary functions, should not be subject to the Italian DST.

In general, the Italian DST also should not apply to digital services when users do not play a central role in the value creation for the relevant taxable person.

Place of taxation

Revenues earned by an entity carrying on taxable services are taxable in Italy if the user of the relevant digital service is, during the calendar year, deemed to be located in Italy.

In this regard, a user is considered to be located in Italy, if:

  • In the case of taxable digital services falling into category a), above, the relevant advertising appears on user’s device when it is used in Italy to access a digital interface;
  • In the case of taxable digital services falling into category b), above:

-      With respect to services involving a multi-sided digital interface that facilitates the sale of goods or services directly between users, the user employs a device in Italy to access the digital interface and concludes an underlying transaction in the same calendar year, or

-      With respect to services involving any other multi-sided digital interface, the user has an account allowing him to access the digital interface from and such account was opened using a device in Italy; and

  • In the case of taxable digital services falling into category c), above, the relevant data is generated by the user in Italy to access a digital interface and is transmitted in the same calendar year.

More specifically, to determine whether a device is located in Italy the Internet Protocol (IP) address, which connects the device to the web, or any other geolocation system, is taken into account.

Taxable revenues, tax rate and compliance obligations

The Italian DST will be chargeable on the portion – taking into account the overall (i.e. global) taxable digital services provided by a taxpayer – of taxable digital services specifically connected to the Italian territory (and computed separately for each type of taxable digital services provided).

Taxable persons subject to the Italian DST must maintain proper  accounting systems in order to record, on a monthly basis, the taxable revenues, as well as the underlying numerical data for computing the applicable ratios.

Relevant revenues are total gross revenues, net of value added tax (VAT) and other indirect taxes.

The Italian DST is levied at 3% rate on the annual revenues and must be paid by February 16th of the following calendar year and on the basis of an annual tax return, to be filed by March 31st of the same calendar year.

Non-resident companies without both a permanent establishment in Italy and a registration number for VAT purposes, that satisfy, during any calendar year, the taxable person threshold requirements, must request a DST identification number to the Italian Revenue Agency.

Further, non-EU/EEA companies without a permanent establishment in Italy, must appoint local tax representatives, who will be directly responsible for such taxpayers’  compliance obligations.

It is expected that the Italian Revenue Agency will issue relevant guidelines providing additional information on the implementation of the Italian DST in the near future.

For more information contact

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