The Budget Law for 2020, enacted in late December 2019, introduces a digital services tax.
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 following services are not within the scope of Italy’s digital services tax:
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.
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:
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 Once a trans-national framework is implemented, the Italian digital services tax would automatically be repealed, so as to avoid discrepancies between the international and domestic tax treatment of digital services.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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