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November 6, 2024
2024-2041

Italy proposes significant changes to the Digital Services Tax

  • The Italian government has proposed to remove the revenue thresholds that currently apply to the Digital Services Tax so that any business generating revenues from digital services in Italy will automatically be subject to the tax.
  • The new reporting obligations are expected to be effective from 1 January 2025.
  • The proposal is currently under parliamentary discussion and may be subject to changes.
 

With the approval of the 2025 Italian Budget Law draft on 15 October 2024, the Italian government is proposing a significant amendment to the Digital Services Tax (DST) regulation, outlined in Article 4 of the new draft law. This amendment removes the previously required revenue thresholds, expanding the scope of entities potentially liable to the application of 3% DST.

What would change?

Revenue thresholds would be removed. Companies would no longer need to exceed €750m in global revenues and €5.5m in Italian revenues from digital services to be subject to DST. Any business generating revenues from digital services in Italy would automatically be subject to the tax.

Who would businesses be affected?

  1. Small digital service providers: Businesses that previously fell below the DST revenue thresholds may now be considered to be taxable entities.
  2. Companies with ancillary digital activities: Businesses not strictly part of the digital sector but conducting ancillary digital activities in Italy (e.g., platforms primarily selling their own products but also allowing third-party sales) could now be subject to DST, regardless of the scale of these activities.

Compliance obligations

Because no transitional phase is planned, companies that qualify as taxable persons under the new rules would need to comply with relevant reporting and accounting obligations starting from 1 January 2025.

Next steps

The Budget Law is currently under parliamentary discussion and may be subject to changes. However, companies potentially affected should carefully evaluate their position, especially if they currently fall within the DST definition of providing digital services as per paragraph 37 of Article 1 of Law no. 145/2018:

  • Placement of targeted advertising on a digital interface
  • Availability of a digital interface allowing users to interact and facilitate the supply of goods/services directly between users
  • Transmission of data collected from users and generated through digital interfaces.
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Contact Information

For additional information concerning this Alert, please contact:

Studio Legale Tributario, Italy

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor
 

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