A web tax also renamed as “Google tax” aimed at obliging foreign Internet operators to pay Italian taxes is currently subject of discussion before the Italian Parliament and has raised considerable concerns also in relation to its potential lack of compliance with EU principles.
According to a recent law proposal, it would be possible for Italian customers to purchase in Italy online products and services only from entities that hold an Italian VAT number which therefore should invoice their Italian customers charging the 22% Italian VAT as opposed to the VAT rate provided by the country of their establishment that is considerably lower in countries like Luxembourg and Ireland.
This proposal is mainly aimed at obliging entities like Google, Amazon or Facebook that generate considerable amounts of revenues in Italy, but invoice their Italian customers through their foreign entities to pay Italian taxes. However, the law provision (if passed) might have an impact on any entity selling online services such as advertising services to Italian customers and on any e-commerce operator. Also, according to the MP that submitted the law proposal its provisions might have an impact on the gaming sector as well and for instance it might be relevant for agreements with gaming affiliates.
The bill has been criticised as it has been deemed in breach of the European principles of freedom of goods and services according to which it is not possible to place restrictions to the possibility for entities located in other countries of the European Union to offer their products and services in another European Union member.
The outcome of this debate is uncertain and it will be interesting to see whether the Italian Parliament will take the risk to pass a law which is quite likely to the challenged before European authorities. In the meantime online operators selling their products and services to Italian customers and having offices in Italy providing ancillary services such as marketing are subject to considerable scrutiny by Italian tax authorities since such offices can be deemed to be a permanent establishment in Italy for tax purposes and therefore it is challenged to them the lack of payment of Italian taxes on the revenues generated by their headquarter located abroad.
I will update you on the future developments, but in the meantime feel free to contact me, Giulio Coraggio (firstname.lastname@example.org) if you want to discuss. Also, follow us on our IPTitaly group on LinkedIn and on Twitter.