Budget Law 2020 – What the digital tax provides

Focus Budget Law 2020

The Budget Law 2020 (Law n. 160 of 27 December 2019) published on the Official Gazette on 30 December 2019 amends the Italian Digital Service Tax DST (Article 1, paragraph 678, of the Budget Law 2020) whose main features are. Tax rate is set at 3% and apply to gross revenues resulting from certain B2B and B2C digital services, that are:

  • the placing on a digital interface of advertising targeted at users of that interface;
  • the making available to users of a multi-sided digital interface allowing users to be in contact and to interact with other users, and which may also facilitate the provision of underlying supplies of goods/services directly between users;
  • the transmission of data collected from users and generated from users’ activities on digital interfaces

    Specific exclusions are provided, such as: non-targeted online advertising; digital interface to provide users with digital content, communication services or payment services; certain regulated financial services; services provided within the group for consolidation purposes; direct sale of goods or services online; etc.

    DST taxpayers are all enterprises, whether resident or not, with total worldwide revenues (of any kind) exceeding EUR 750M, and total amount of digital revenues in the Italian territory exceeding EUR 5,5M – on a consolidated basis.
    DST applies from 1 January 2020. In order to check whether the thresholds have been met, enterprises must refer to the revenues of fiscal year 2019, so a retroactive analysis would be necessary.

    Taxable revenues are deemed Italian-sourced if the user is located in the Italian territory. A user is deemed to be located in the Italian territory if:

  • the advertising appears on the user’s device while used in Italy;
  • In case of multi-sided digital interfaces, (i) if the user accesses the digital interface through an account opened using a device in Italy, or, (ii) if it uses a device in Italy to access the digital interface and concludes an underlying transaction;
  • the data generated from the user having used a device in Italy to access a digital interface is transmitted in that tax period.

    Devices shall be deemed to be used in Italy mainly by reference to the Internet Protocol (IP) address.
    DST shall be calculated on the portion of worldwide taxable revenues that are considered as obtained in Italy according to specific allocation keys.

    Taxpayers must keep a special monthly ledger where taxable revenues have to be reported. DST payment is due by 16 February of the year following that of reference (first payment due is on 16 February 2021) and the DST return has to be submitted on 31 March of the year following that of reference (first tax return is due on 31 March 2021).Enterprises subject to DST which are not established in Italy must obtain a digital service tax identification number, or appoint a tax representative in Italy, to comply with reporting requirements and pay the DST due. Enterprises established in Italy belonging to the same group of a non-resident taxpayer are jointly liable with this latter for DST compliance.
    Enterprises running a digital business should immediately consider if they fall within the scope of the DST and in case evaluate which would be the implications for them and which actions require an immediate intervention.