The 2020 budget law has amended Italy’s digital services tax (DST), reflecting the European Union Commission’s proposal in March 2018.The revised version of Italy’s DST is now effective January 1, 2020.
The new law substantially changes the existing tax regulations on digital services introduced with the 2019 budget law, which never took effect.
DST in short
The main features of the Italian DST can be summarized as follows:
- Effective from January 1, 2020;
- The tax period coincides with the calendar year;
- This applies to certain types of business-to-consumer (B2C) and business-to-business (B2B) services that imply high levels of user engagement;
- This is caused by a service provider (Italian or foreign) when a certain income threshold is exceeded;
- 3% tax rate on income;
- DST payments are due on February 16 of the following calendar year and special DST returns must be submitted by March 31st;
- Revenue from intra-group services is not taxable;
- Appropriate accounting to collect monthly information about taxable service income;
- Clarification awaits from the Revenue Agency; and
- It will be repealed after international treaties (‘sunset clause’)
Taxable Entrepreneurs are those who carry out business activities individually or in groups in the calendar year before the person concerned jointly registers:
a) Total revenues (wherever realized) should not be less than € 750 million ($ 872.3 million); and
b) The amount of revenue obtained from digital services realized in the territory of the country is not less than € 5.5 million.
DST applies to revenue derived from providing the following types of services:
a) Placement on the digital interface of advertisements intended for the same user interface (online ad placement);
b) Provide a multilateral digital interface that allows users to connect and interact with each other, also to facilitate the direct supply of goods or services (digital platforms that facilitate interaction between users); and
c) Transmission of data collected from users and generated using a digital interface (sales of user data collected).
The following services are outside the scope of a DST deployment:
a) Direct supply of goods and services, as part of digital intermediary services;
b) The supply of goods or services ordered through the website of the supplier of such goods and services, when the supplier is not performing an intermediary function;
c) Provision of digital interfaces whose exclusive or primary purpose is to provide user interfaces, by parties managing the same interface, with digital content, communication services or payment services;
d) Provision of digital interfaces used to manage trading platforms and settlement systems for interbank or financial instruments and other services which are subject to monitoring by regulatory authorities;
e) Data transfer by subjects providing services as referred to in letter d); and
f) Organization and management of telematic platforms for the exchange of electricity, gas, environmental and fuel certificates, as well as the transmission of relative data collected on them and other related activities.
Calculation of DST and related conditions
Taxable income is assumed to be gross costs and net of value added tax and other indirect taxes.
An income is considered taxable within a specified tax period if the taxable service user is located in the territory of the state for that period. Special rules are provided to identify the concept of ‘user location’.
Tax payable is obtained by applying a rate of 3% on the amount of taxable revenue made by the Taxable Entrepreneur during the calendar year.
For companies that are members of one group, one group of entities is appointed to fulfill obligations that come from tax-related provisions on digital services.
Non-residents, without a permanent establishment in Italy and without an identification number for VAT purposes, who meet DST requirements during the calendar year, must apply for an identification number for digital services tax purposes to the revenue agency.
In addition, non-residents, without a permanent establishment in Italy, are established in a country other than a member state of the EU or the European Economic Area, with which Italy has not entered into administrative cooperation agreements to combat tax evasion and fraud, or mutual assistance agreements for claim recovery. tax, must appoint a tax representative to fulfill the digital service tax reporting and payment obligations.
Given the complex mechanisms provided for the practical application of DST, interested businesses are waiting for clarifications to be announced from revenue agencies. The implementation of the Italian DST was accompanied by an updated international debate on the topic due to the latest documents and reports from the OECD and the United Nations, as well as political pressure exerted by the EU.
Gian Luca Nieddu
T: +39 02 7780711
T: +39 02 7780711
The material on this site is intended for financial institutions, professional investors and their professional advisors. This is for information only. Please read us Terms and Conditions and Personal secret before using the site. All material is subject to copyright laws which are strictly enforced.
© 2019 Euromoney Institutional Investor PLC. For assistance, please see Our FAQ.
Share this article
to request modification Contact us at Here or [email protected]