Article 1, para 35-50 of Law no. 145 of 30 December 2018 (i.e. Italian Budget Law for 2019) introduced the Digital Services Tax (DST) on turnover derived from certain "digital services”. The entry into force of the DST was subject to the issue of a Ministerial Decree that should have provided the related operative instructions. However, the DST never came into force, as the implementing measures were never adopted.
The draft Italian Budget Law for 2020 – published on 2 November and to be approved by the Government by the end of December – should amend the previous version of the DST proposed last year.
According to the new rules, the DST applies to revenues resulting from the supply of certain digital services, obtained by the taxable persons described below during a calendar year.
Taxable persons are businesses (e.g. Italian companies, non-resident companies with a local permanent establishment (PE) or identified in Italy for VAT purposes, as well as non-resident companies without a local PE nor identified in Italy for VAT purposes) that, individually or at group level, in the calendar year prior to the one in which the taxable revenues are obtained, meets the following joint revenue thresholds:
The DST will apply to revenues resulting from the provision of the following services:
The taxable revenues will include total gross revenues, net of VAT and any other indirect taxes.
Revenues deriving from the provision of the abovementioned services will not be taxable if the services are rendered to related parties (i.e. companies that are deemed to be parent, subsidiary or sister companies, pursuant to article 2359 of the Italian Civil Code).
The DST will not apply to the provision of the following services:
The tax period will be the calendar year.
Revenue will be taxable in a tax period if the user of the taxable service is located in Italy in that period.
A user will be deemed to be located in Italy if:
The device will be deemed to be used in Italy mainly by reference to the Internet Protocol (IP) address of the device itself or any other system of geolocation.
DST will be calculated by applying a 3% rate to the amount of taxable revenues obtained by the taxable person during the calendar year. Specific rules apply for the determination of the taxable base.
Taxable persons must pay the DST by 16 February of the calendar year following the one in which the taxable revenues are obtained. The same taxable persons must file the annual return to declare the taxable services by 31 March of the same year. A specific accounting method must to be adopted by taxable persons for recording, on a monthly basis, data on revenues related to taxable services and any other useful quantitative data.
DST will apply automatically from 1 January 2020, without the issue of any Ministerial Decree establishing how to apply DST.
The Italian DST will be repealed when the internationally agreed provisions on digital economy taxation become applicable.
 Non-resident companies without a local PE nor identified for VAT purposes in Italy, shall apply to Italian Revenue Agency for an identification number, in order to pay DST. Non-resident companies without a local PE, established in a State different from EU or SEE member States with which Italy does not have an agreement for the administrative cooperation for combating fraud and an agreement for the mutual assistance in the collection of taxes, shall appoint a tax representative for the fulfilment of tax obligations. Resident persons belonging to the same group of the non-established DST taxable persons shall be jointly and severally responsible for DST compliance.
 The payments made for the provision of services include the consideration paid by the users of the digital interface, except consideration paid for the purchase of goods and services that departed from the login and the use of the taxable service. Moreover, the payments do not include those made for the use of the digital interface in order to purchase goods subject to excise duty.
 For companies belonging to the same group, a single company shall be appointed to fulfil the obligations resulting from the DST provisions.