Beginning in 2025, changes to the Italian Web Tax will be implemented.
Several years ago, the Italian Digital Services Tax, or “web tax” implemented a 3% tax on digital revenue for entities meeting certain criteria. Digital revenue includes digital advertising, user access, and the transfer of user data. Companies that, during the prior year, exceeded both (1) €750 million in global revenue and (2) €5.5 million annual revenue from qualified digital services to Italian customers were subject to the “web tax” for digital revenue.
Proposal
- The removal of both thresholds was proposed for 2025, which would have subjected any entity with revenue from Italian digital services to the 3% tax.
- This sparked concern among small- and medium-sized companies with digital revenue, who would be negatively impacted by these changes. Arya Stilton, a writer for the Italian magazine Close-up Engineering, wrote, “These companies do not have the financial resources and flexibility that characterize large technology groups and are not prepared to absorb an additional tax burden. The risk is that the measure, instead of hitting multinationals that exploit tax loopholes, ends up penalizing smaller companies, which are a vital part of the Italian digital economic fabric” [translated from Italian to English]. Further, Stilton expressed concern that the proposed changes would be “increasing the risk of further erosion of the Italian digital market.”
Results
While the finalized 2025 Budget Law upheld the first threshold, the second threshold was removed. The 3% “web tax” on Italian digital revenue now applies to any entity that exceeds €750 million in global revenue, regardless of the entity’s total Italian digital revenue.
Implications
- The removal of the second threshold will increase the number of large entities facing the digital services tax.
- The upholding of the first threshold means that small- and medium-sized entities are not subject to the tax.
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