The tax on digital services, or Digital Services Tax (DST), introduced by the 2019 Budget law, governed by article 1, paragraphs 35 – 50, Law 145/2018 and subsequently amended by the 2020 Budget law in article 1, paragraph 678, Law 160/2019, finds its first effective application in Italy in 2021. Thanks to the extensions provided for by decree-law n. 3/2021 approved on 14 January 2021, the deadline for making the tax payments was postponed to 16 March 2021 and the presentation of the relative return was postponed to 30 April 2021. The Revenue Agency, with provision no. 13185 published on 15 January 2021, outlined the methods of applying the tax, providing mostly generic definitions and identifying taxable digital services, with some specific exclusions.
Subjective and objective assumption
The taxpayers are the subjects carrying out business activities who, during the calendar year preceding the one in which the tax assumption arises, jointly possess the following two requirements:
– achieve anywhere in the world, individually or jointly at group level, a total amount of revenues of no less than Euro 750,000,000;
– receive in the same period, individually or jointly at group level, an amount of revenues from digital services of no less than 5,500,000 euros in the territory of the State.
First of all, the reference time frame for verifying these conditions is the previous calendar year. From reading the provision, the requirements must be verified by applying two different criteria:
– the accruals criterion for calculating total revenues, i.e. considering the revenues that refer to and have effect in the previous year taken into consideration for the verification, regardless of the related financial events;
– the cash criterion for identifying the threshold referring to digital services, given that the verb “perceive” is specifically used.
Digital services must refer to:
– the transmission on a digital interface of advertising aimed at the users of the same interface;
– the provision of a multilateral digital interface that allows users to be in contact and interact with each other, also in order to facilitate the direct supply of goods or services;
– to the transmission of data collected from users and generated by the use of a digital interface.
The digital interface can be identified in any software, including websites or parts thereof and applications, including mobile ones, accessible by users through which digital services are provided by taxable persons. The multilateral nature of the digital interface is expressed when interaction between users is allowed, also in order to facilitate the direct supply of goods and services.
The main difficulty lies precisely in identifying the digital services to be included in the taxation. Only a generic definition of “transmission” of targeted advertising is given, meaning the service rendered by digital interfaces that can host targeted advertising or transfer the advertising message to third-party sites, receiving a fee for the provision of space concession in the first case, or for the brokerage business in the second. However, the provision identifies on the basis of a precise list the services that are excluded from the objective scope of the tax:
a) the direct supply of goods and services, as part of a digital intermediation service;
b) the supply of goods or services ordered through the website of the supplier of those goods and services, when the supplier does not act as an intermediary;
c) the provision of a digital interface whose exclusive or main purpose, in terms of revenues generated, is that of providing the users of the interface, by the subject managing the interface itself, with digital contents, services communications or payment services;
d) the provision of a digital interface used to manage:
1. the systems of interbank settlements envisaged by the consolidated text referred to in the legislative decree of 1 September 1993, n. 385, or settlement or delivery of financial instruments;
2. the trading platforms or trading systems of the systematic internalisers referred to in article 1, paragraph 5-octies, letter c), of the consolidated text referred to in legislative decree no. 58;
3. equity investment consultation activities and, if they facilitate the granting of loans, equity financing intermediation services;
4. the wholesale trading venues referred to in article 61, paragraph 1, letter e), of the consolidated act referred to in legislative decree no. 58;
5. the central counterparties referred to in article 1, paragraph 1, letter w-quinquies), of the consolidated text referred to in legislative decree 24 February 1998, n. 58;
6. the central depositories referred to in article 1, paragraph 1, letter w-septies), of the consolidated act referred to in the legislative decree of 24 February 1998, n. 58;
7. other connection systems whose activity is subject to authorization and the execution of the provision of services subject to the supervision of a regulatory authority in order to ensure the security, quality and transparency of transactions involving financial instruments, products savings or other financial assets;
e) the transfer of data by subjects providing the services indicated in letter d);
f) the organization and management of telematic platforms for the exchange of electricity, gas, environmental certificates and fuels, as well as the transmission of the related data collected therein and any other connected activity.
Determination of the tax
The tax is determined by applying the rate of 3% to the taxable revenues received during the calendar year by taxpayers for the provision of digital services wherever performed, but limited to the percentage representing the part of such services connected to the territory of the state. Taxable revenues are assumed gross of costs incurred for the supply of digital services and net of value added tax and other indirect taxes.
In determining the tax base, the revenues deriving from digital services rendered to subjects, both resident and non-resident in the territory of the State, which are considered controlled, controlling or controlled by the same controlling subject pursuant to article 2359 of the Civil Code must not be considered in the same calendar year. For the purposes of taxability, it does not only detect the type of service, but also the location in the territory of the user’s country, based on the internet protocol (IP) address of the device used. Taxable persons may use any other information that allows the geolocation of the device.
The location of the user and the determination of the tax base are thus identified for each category of digital service:
– delivery services on a digital interface of targeted advertising: the user is considered located in the territory of the State if the device is used there when the advertising appears on it, in the reference calendar year. For the purpose of calculating taxable revenues, the considerations received by the taxable persons who place the advertising message on third-party sites and the considerations received by the taxable subjects who host the advertising content on the digital interface are recognized;
– provision of a multilateral interface which facilitates the supply of goods or services: the user is located in the territory of the State when he uses a device there to access the digital interface and concludes a corresponding operation on this interface, in the reference calendar year. For the purpose of calculating taxable revenues, the amounts paid by users of the digital interface are recognized, with the exception of operations independent of access and use of the digital service;
– transmission of data collected from a digital interface: the user is considered to be located in the territory of the State in the calendar year in which the data transmitted are generated by the same using a device located there to access a digital interface in the same calendar year or in previous periods. For the purpose of calculating taxable revenues, the considerations deriving from the transmission for consideration of the data obtained from the activity of the users on the digital interfaces are recognized.
Tax payment and declaration
The deadline for the payment of the tax is set by 16 February of the calendar year following the one in which the taxable revenues are realised. Taxpayers are also required to submit the annual return by 31 March of the calendar year following the one in which the taxable revenues are realised. The decree-law n. 3 of 15 January 2021 intervened by extending the aforementioned deadlines for taxable transactions in the year 2020, upon first application, deferring the payment by 16 March 2021 and the presentation of the return by 30 April 2021.
On 25 January 2021, with provision no. 22879, the Revenue Agency approved the annual declaration model for the tax on digital services with the relative instructions and technical specifications for the electronic transmission of data. The tax codes to be used for the payment of the tax will be established with a specific resolution, yet to be published. Refunds of excess payments are requested by completing the same declaration.
Non-resident subjects without a tax code
Non-resident subjects who must fulfill the obligation to pay and declare the tax must request the assignment of their own tax code by filling in the forms available on the website of the Revenue Agency.
Natural persons must use the AA4/8 form and deliver it to the Italian diplomatic-consular representation in the country of residence or to any office of the Revenue Agency, directly or through a delegated person.
Subjects other than natural persons must use the AA5/6 form and present it to the Revenue Agency, to the Pescara Operations Center, directly or through a delegated person, or by postal service or by e-mail to the email address revenue.isd @agenziaentrate.it.
On the other hand, taxable persons established in a non-cooperative state and without a permanent establishment in Italy must appoint a tax representative in Italy.
Companies belonging to the same group
At the end of the calendar year, taxpayers belonging to a group may designate a group company, which is a taxpayer, in order to fulfill the mandatory obligations, choosing as a priority among subjects resident or established in Italy, if existing, or among non-residents (however, it must not be a subject resident in a non-collaborative country), following the procedures for assigning the tax code already indicated. The designation is valid for one year and may apply to all or some of the companies that form part of the group. The designated company is jointly responsible with the designating companies for the correct fulfillment of the tax and reporting obligations. The latter will consequently have to transmit the data and information used to calculate the tax within the respective deadlines. The companies that do not adhere to the designation autonomously provide for the tax obligations.
Furthermore, specific accounting obligations arise for the taxable subjects, who are required to report on a monthly basis in a specific “analytical statement of the information on taxable revenues and on the monthly quantitative elements used to calculate the tax”, which must be drawn up within the deadline for paying the tax. This information must be compiled and kept on an IT support that guarantees the inalterability and conservation of the recorded data. The statement is also accompanied by an “explanatory note of information on revenues and quantitative elements used to calculate the tax” to be drawn up annually by the deadline for submitting the return. All documentation must be kept and made available upon request by the Tax Administration.
Laura Di Martino