Italian Digital Service Tax

• Italy

• General

02-02-2021

Italian Goverment introduced, with effect from 1 January 2020, a 3% tax on digital services which is leived on revenues of web’s giants (imposta sui servizi digitali, “DST”).  

On January 15, 2021, Italian Tax Authorities (“ITA”) published the Explanatory Provision (“Provision”) with details notes on DST.

On January 25, 2021, ITA published also the tax return model.

1. TABLE ENTITIES

In detail, with effect from 1 January 2020, the 3% tax is levied on the gross revenues (exclusive of VAT and other indirect taxes) derived from the supply of qualifying digital services (as defined in para. 2) by enterprises which, in the previous calendar year, individually or at group level, realized:

-      a total amount of worldwide revenues of at least EUR 750 million; and

-      a total amount of revenues from qualifying digital services in Italy of at least EUR 5.5 million.

If the service provider is a non-resident and does not have a permanent establishment in Italy, an identification number must be requested to the Italian Tax Authorities.

2. SERVICES SUBJECT TO DST

DST applies on the following services:

a)    the placing on a digital interface of advertising targeted at users of that interface;

b)    the making available of a multi-sided digital interface which allows users to contact other users and interact with them, also in order to facilitate the direct supply of goods or services; and

c)    the transmission of data collected from users and generated from the use of a digital interface.

The Provision explains that DST does not apply to the following services:

1. the direct supply of goods and services within a digital intermediary service;

2. the supply of goods and services through the supplier's website, provided that the supplier is not an intermediary;

3. the making available of a multi-sided digital interface whose exclusive or main purpose is to provide its users digital content or communication and payment services, by the same person managing the interface;

4. the making available of a multi-sided digital interface to manage certain regulated financial services and the transmission of related data by qualifying financial entities; and

5. the organization and management of digital platforms for the exchange of electricity, gas, environmental certificates and fuels, and the transmission of related data.

Intercompany services are in any event excluded from the scope of DST.

3. PLACE OF TAXATION

Revenues are taxable in Italy, provided that the user of the qualifying digital service is located in Italy. According to the Provision, a user is deemed to be located in Italy where:

-      service a):

the relevant advertising appears on the user's device at a time when the device is being used in Italy to access a digital interface in the tax period;

-      service b):b

-      if the service involves a multi-sided digital interface that facilitates the direct supply of goods or services between users, the user uses a device in Italy to access the digital interface and conclude a transaction on such interface in the tax period; or

-      if the service involves another multi-sided digital interface, the user has an account for all or part of the tax period allowing it to access the digital interface and such account was opened using a device in Italy;

-      service c):

the data generated from the user having used a device in Italy to access a digital interface, during the tax period or any previous one, is transmitted in the tax period.

4. TAXABLE REVENUES, TAX RATE AND COMPLIANCE OBLIGATIONS 

Taxable revenues are equal to the amount of revenues derived from qualifying digital services realized worldwide multiplied for a percentage representing the portion of qualifying digital services connected to Italy. The tax base is calculated gross of costs and net of VAT and other indirect taxes.

The DST applies, with a 3% rate, to the amount of taxable revenues realized in each calendar year.

Taxable entities are required to:

i)             pay DST due by 16 February;

ii)            submit an annual return by 31 March of the following year;

iii)           With reference only to FY2020, the deadline for the payment of DST is March 16, 2021 and the deadline for the submission of the related tax return is April 30, 2021.

Taxable persons must keep separate accounting records in order to register revenues from qualifying digital services.

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