Share This Article
There is no need of a web tax dedicated to digital companies according the report from the Expert Group on Taxation of the Digital Economy established by the European Commission, but the current general rules should be applied also to digital companies. However, recent court decisions and delegation laws leave some risks open in relation to the Internet liability regime of web companies for tax purposes.
The discussions relating to the web tax or Google tax as it was also known have been very intense in Italy at the end of last year and the law introducing it had to be repealed just the day before its coming into force.
The issue on the web tax is well known. Governments complain because web companies operate in their jurisdictions targeting their customers from other countries that enjoy a lower level of taxation. Therefore the attempt has been to make such entities subject to the taxation of the targeted country. However, the lack of compliance of such proposals with European Union principles have been always raised as an issue limiting the possibility for a single jurisdiction to introduce such regime for companies based in other European countries.
A recent interesting decision from the Italian Criminal Supreme Court that saw our firm involved slightly changed the scenario though. Indeed, the court held that an online company having its registered office abroad that uses an Italian company for online remote support activity to customers located in Italy cannot be considered to have either a permanent establishment or a tax residence in Italy and, hence, should not be taxed in Italy.
Such regulatory restrictions have not hindered though the actions from local tax authorities. And indeed for instance Italian authorities have been very aggressive against companies operating in Italy from abroad but with a marketing or a representation office in Italy. The arguments challenged to such entities are always that the persons located in Italy reppresent a permanent establishment for tax purposes of the foreign entity that therefore shall be taxed in Italy. But the above mentioned decision creates an interesting precedent even through the position from criminal courts is not always followed by tax authorities.
A law of last year still empowered the Government to adopt measures like the web tax, but given the above mentioned negative opinion from tax experts and the court precedent referred herein, this is unlikely to happen. In any case if you have questions on the matter, feel free to contact me, Giulio Coraggio to discuss. Also, if you want to receive my newsletter, please join my LinkedIn Group or my Facebook page. And follow me on Twitter, Google+ and become one of my friends on LinkedIn.
