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In 2025, Italy implemented significant changes to its Digital Services Tax (DST) regime, aiming to broaden its scope and address international concerns, particularly from the United States. These reforms are part of Italy’s strategy to increase tax revenues from digital services and align with global tax discussions.
Key Changes in the 2025 Budget Law
1. Removal of the €5.5 Million Local Revenue Threshold
Previously, the DST applied to companies with both global revenues exceeding €750 million and Italian digital services revenues over €5.5 million. The 2025 Budget Law eliminates the €5.5 million local revenue threshold, meaning that any company with global revenues above €750 million is subject to the DST on any amount of Italian digital services revenue.
2. Revised Payment Deadlines
The payment schedule for the DST has been updated:
- Advance Payment: 30% of the previous year’s DST liability is due by November 30 of the current year.
- Balance Payment: The remaining balance is due by May 16 of the following year.
- Tax Return Filing: The DST return must be submitted by June 30 of the year following the reference year.
Scope of the Digital Services Tax
The DST applies a 3% levy on revenues derived from specific digital services provided to Italian users, including:
- Online Advertising Services: Revenues from placing targeted advertising on digital interfaces based on user data.
- Multisided Digital Interfaces: Revenues from platforms facilitating interactions between users, potentially leading to the supply of goods or services.
- Transmission of User Data: Revenues from selling or transferring data collected from users and generated through digital platforms.
Certain services are excluded, such as direct sales of goods and services without intermediation and intra-group digital services under specific conditions.
International Reactions and Diplomatic Considerations
The United States has expressed concerns that the DST disproportionately affects American tech companies like Google, Apple, Meta, and Amazon. In response, Italy and the U.S. issued a joint statement opposing “discriminatory” digital services taxes, indicating potential reconsideration of the DST’s structure.
Despite these discussions, Italy faces internal political pressure to maintain or even expand the DST to support budgetary needs. The government is balancing international diplomatic relations with domestic fiscal objectives.
Compliance and Administrative Requirements
Companies subject to the DST must:
- Self-Assess Liabilities: Determine the amount of DST owed based on revenues from qualifying digital services provided to Italian users.
- Maintain Detailed Records: Keep comprehensive records of transactions falling under the DST’s scope to substantiate filings.
- Adhere to Filing Deadlines: Submit the DST return by June 30 of the year following the reference year.
Non-compliance can result in administrative penalties, and in certain cases, criminal penalties may apply.
Italy’s 2025 reforms to the Digital Services Tax represent a significant shift in taxing the digital economy, aiming to capture revenues from multinational digital companies operating within its borders. While these changes address some international concerns, they also reflect Italy’s commitment to ensuring that digital services contribute fairly to its tax base. Ongoing international negotiations, particularly within the OECD framework, will continue to influence the future of digital taxation policies.
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