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A 3% Italian web tax on the value of B2B digital transactions has been approved through the Budget Law, even though it will be effective from 2019.
Update of 27.12.18 – An Italian web tax was eventually adopted and you can find the details in this article “Italian digital tax – what it is, how it works and when it applies?”
There has been lots of discussion around an Italian web tax with different proposals reviewed during the last years. However, the Italian web tax has now become law, even though its scope is slightly different from what initially planned. Below is an outline of its contents that was drafted with the support of my tax colleague Antonio Tomassini.
What is the Italian web tax or digital tax?
The Italian web tax is a 3% tax on the value of some “services performed through electronic means” by Italian and foreign entities to the benefit of companies located in Italy. The services that will fall under the scope of the tax are defined as those
“provided through the Internet or an electronic network and whose nature makes the activity essentially automated, with a minimum human intervention which would be impossible without the technology“
The above definition is very broad and the services will be better identified in a decree to be issued by the Ministry of Finance. However, the main features of the Italian web tax are that:
- It does not apply to business to consumer transactions, but only to B2B transactions which might include, among others, the supply of online advertising, cloud computing and online games, including gambling games;
- It applies to both Italian and foreign entities that supply their services to companies located in Italy; and
- It does not apply to entities that perform less than 3,000 transactions falling under the scope of the Italian web tax.
How does it work?
The taxable basis for the calculation of the 3% tax is for both Italian and foreign entities equal to the consideration agreed between the parties, net of VAT and without granting tax credits to entities that already pay taxes in Italy.
The tax has to be retained at the moment of the payment by the Italian entity that receives the payment which is obliged to pay it to the State by the 16th of the following month.
Is it time to panic?
The Italian web tax is officially into force, but will become binding from the 1st of January 2019. Therefore it is not possible to exclude further changes to its scope during the coming months.
Also, it will be interesting to see how the exemption applicable to entities performing less than 3,000 transactions will be interpreted i.e. does it refer to 3,000 invoices? If so it might be circumvented just changing the timing of invoicing.
I will keep you updated. In the meantime, if you found this article interesting please share it on your favourite social media.
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