🎧 Listen to This Article
In a move that could reshape the digital tax landscape, Italy and the United States jointly declared that Digital Services Taxes (DSTs) are “discriminatory”, following recent meetings between Italian Prime Minister Giorgia Meloni and U.S. President Donald Trump. The announcement comes amid mounting trade tensions and slow progress on a global agreement under the OECD’s Pillar 1 framework.
Italy currently levies a 3% DST, raising nearly €500 million annually, largely from U.S. tech giants such as Meta, Google, and Apple. But despite the joint statement, Italy has not yet committed to scrapping or freezing the tax, citing a widening budget deficit and domestic political support for taxing offshore digital revenue.
On February 21, 2025, President Trump signed an executive order to investigate potential tariff retaliation against countries like Italy that continue to enforce DSTs. Washington has long argued that DSTs unfairly single out American firms by targeting turnover, not profit, and applying only to large, predominantly U.S.-based digital providers.
“This is not taxation—it’s protectionism in disguise,” a senior U.S. trade official said, citing concerns over unequal treatment of domestic vs. foreign digital enterprises.
In a conflicting signal, Italy’s 2025 Budget Law actually tightened DST regulations, removing a key revenue threshold. Previously, companies only needed to pay DST if they had over €5.5 million in Italian digital revenue. Now, any company with over €750 million in global digital revenues must pay DST on any level of income from Italian users.
This policy shift brings more non-resident providers—including companies where digital activity is secondary, like automotive platforms—into the DST regime.
“It’s a clear message that Italy is growing impatient with the OECD’s delays,” said one tax analyst. “They need revenue and political wins.”
New Compliance Timelines:
- Advance payment due: November 30 of the same year, 30% of prior year’s DST
- Balance due: May 16 of the following year
These changes will increase the tax burden for foreign companies while also streamlining compliance for Italian authorities.
Qualified Services Under Italy’s DST
Italy’s DST targets revenues from:
- Online Advertising (e.g. targeted ads based on user data)
- Multisided Digital Platforms (e.g. marketplaces like Airbnb or Uber)Transmission/Sale of User Data
It is a gross revenue tax, not based on profits, and applies only to revenues linked to Italian users. Companies must self-assess, maintain detailed user-revenue records, and face penalties for non-compliance.
OECD Pillar 1 Reform Stalls
Italy’s renewed push on DST coincides with stalled global tax negotiations under the OECD’s Pillar 1 framework, which aims to allocate digital profits across jurisdictions based on user location, not corporate residence. Many countries had agreed to a temporary pause on changing DSTs during negotiations, but Italy’s latest move breaks from that moratorium.
“This shows growing frustration among mid-sized economies,” said an international tax consultant. “They’re tired of waiting for consensus.”
Digital Taxes Across Europe
Italy is not alone. DSTs have been introduced (or proposed) across Europe:
- France & Spain: 3% DST
- UK: 2% DST
- Austria: 5% on online advertising
- Hungary: 7.5%
- Poland: Delayed implementation
Each targets user-based revenue models of large digital multinationals, mostly American.
For further details, clarification, contributions, or any concerns regarding this article, please contact us at editorial@tax.news. We value your feedback and are committed to providing accurate and timely information. Please note that our privacy policy will handle all inquiries
