As described in our previous Insight, Italy’s digital services tax became effective January 1, 2020, with a sunset clause linked to the outcomes of the OECD’s Pillars (link to unofficial translation of Law 145/2018, as amended). Businesses that earn Italian digital revenues above certain thresholds are subject to the tax, and a traditional ‘nexus’ is not required. For FY 2020, the 3% tax must be paid by February 16, 2021 and a specific tax return must be filed by March 31, 2021.
Par. 46 of art. 1 of Law 145/2018 grants the Italian Revenue Agency the power to issue an executive regulation that is not required for a law’s entry into force (or effectiveness), but which helps determine the scope of the tax’s application.
The Italian Revenue Agency published a draft executive regulation on December 16, 2020 (link to unofficial translation of the regulation) and opened a public consultation (see the Italian Revenue Agency’s website) with a December 31, 2020 deadline to provide written comments.
December 31 is the deadline to provide written comments for the open consultation. Entities interested in discussing the Italian DST’s impact on the business model or the details for contributing to the public consultation should contact those listed below.
Entities that have not yet done so should immediately determine whether they will exceed the relevant taxable revenues and the threshold for digital revenues (i.e., at least 5.5 million EUR generated from providing digital services in Italy). Again, there is no nexus requirement. Those wishing to identify the relevant services and the relevant portion of Italian taxable revenues should consider an in-depth analysis.
Those entities subject to the tax will need to calculate and pay the tax owed for 2020 by February 16, then file the corresponding tax return by March 31.