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Italy: Details of digital services tax

Italy: Details of digital services tax

The Budget Law for 2020, enacted in late December 2019, introduces a digital services tax.

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The goal of the digital services tax is to tax revenues generated over the course of the year by digital services rendered to users located in Italy and identified as such by their IP addresses.

The rate of the digital services tax is 3%


Taxable digital services

There are three distinct categories of digital services:

  • The placing on a digital interface of advertising targeted at users of that interface (Category A)
  • The provision to users of a multi-sided digital interface that allows the users to find and interact with each other, and that may also facilitate the provision of underlying supplies of goods or services directly between users (Category B)
  • The sale of data collected from users and generated by their use of digital interfaces (Category C)


Non-taxable services

The following services are not within the scope of Italy’s digital services tax:

  • The provision of a digital interface for the sole or main purpose of enabling the provider to supply digital content, communication services or payment services to users
  • The supply of regulated financial services by regulated financial entities, through the provision of a digital interface
  • The transmission of data by such regulated financial entities
  • The direct supply of goods and services underlying a digital intermediation service
  • The supply of goods or services ordered through the website of a supplier that is not an intermediary
  • The organization and management of digital platforms for the exchange of electricity, gas, carbon credits and fuels; the transmission of related data; and any other related activity
  • Revenues derived from intercompany digital services


Taxable persons

The digital services tax applies to businesses that, separately or on a group level, in the year before the relevant calendar year, have total revenues of € 750 million or more, or total revenues of € 5.5 million or more derived from digital services supplied in Italy.

To determine whether the revenue thresholds for taxable services are met, information about revenue from taxable digital services must be recorded on a monthly basis in a special ledger.


Compliance rules

The digital services tax is levied on revenues realized from digital services over the course of a calendar year.

The tax must be paid annually (by 16 February of the following calendar year) and an annual return must be filed (by 31 March of that following calendar year).

Concerning taxpayer groups, one of the taxable companies must be appointed to handle all compliance matters, and to act for the group with regard to the obligations imposed by the digital services tax rules.

Non-resident taxable persons—not having a permanent establishment in Italy and established in an EU or EEA Member State with which Italy has not signed a convention on mutual administrative assistance to address tax avoidance and to recover tax liabilities—must appoint a tax representative to fulfill the digital services tax payment and reporting obligations.


Rules for determining the tax

When a taxable service is supplied in Italy in a calendar year, the taxable revenue is the percentage of worldwide revenue from digital services that is represented by the services linked to Italy. That percentage is:

  • In the case of “Category A” services—the proportion of advertising that appears on a user’s device when the user accesses the digital interface while located in Italy
  • In the case of “Category B” services—
    • If the service involves a multi-sided digital interface that facilitates the provision of underlying supplies of goods or services directly between users—the proportion of deliveries of goods or services in respect of which one of the users of the digital interface is located in Italy
    • If the service involves a multi-sided digital interface of a type other than those listed immediately above—the percentage of users who have an account in Italy that enables them to access all or some of the services available through the interface and who have used the interface during the calendar year in question
  • In the case of “Category C” services—the proportion of users in respect of which all or some of the traded data has been generated or collected during the user’s consultation of a digital interface while in Italy


Future developments

The digital services tax is intended to anticipate new tax regimes currently under discussions at the EU and OECD levels. Once a trans-national framework is implemented, the Italian digital services tax would automatically be repealed, so as to avoid discrepancies between the international and domestic tax treatment of digital services.


Read a January 2020 report [PDF 253 KB] prepared by the KPMG member firm in Italy

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