Pending discussions regarding a potential European directive aimed at taxing the digital economy, Italy has introduced its own digital services tax (DST), which substantially mirrors the EU Commission’s DST proposal.

The Italian DST applies to companies with in-scope revenues of more than €750m worldwide and €5.5m in Italy. It came into effect on 1 January 2020 and is levied at 3 per cent on revenues derived from digital services in Italy, including digital advertising, intermediation and data transmission. The Italian government expects the DST to raise €708m for the 2020 tax year.

Similar to the approach recently adopted by France, the Italian government has introduced a sunset clause whereby its DST will be automatically repealed once an agreement on the taxation of the digital economy is reached at an international level. The Italian sunset clause does not, however, oblige Italy to pay back any amounts collected in excess of those that would have been paid under the globally agreed DST.

On the basis of the current legal framework, entities that, on the basis of 2019 revenues, exceed the relevant thresholds and as such become subject to the Italian DST from 2020 will have to pay the DST and file a related tax return before 16 February 2021 and 31 March 2021 respectively.

The legislation does not expressly govern potential criminal penalties should a company be found to have violated its Italian DST obligations. 

Given the complexities relating to determining the DST, uncertainty around penalties and the fact that the 2020 Italian budget law has also introduced an obligation to keep monthly accounting records in respect of the revenues to be taxed in Italy, it is hoped that the Italian tax authorities will issue implementing regulations and guidelines as soon as possible to avoid uncertainty for taxpayers.

Read more about the Italian DST in this article on the Freshfields website.