Vistra Insights

How will Italy's Digital Services Tax impact tech giants' bottom line?

Following in the footsteps of many other countries, the Italian Government approved on 15 October 2019 the introduction of a Digital Services Tax (DST) coming into effect from 1 January 2020.

The DST imposed a rate of 3% on revenues generated from specific B2B and B2C digital services provided to Italian customers. The aim is to tax businesses which traditionally paid low amounts of tax in foreign countries they operated in, those being: search engines, social networks and online marketplaces.                                                                                                           

What services does the Digital Services Tax apply to? 

The DST applies to revenues resulting from the provision of the following services, provided the user of the taxable service is in Italy:

  1. The placing on a digital interface of advertising targeted at users of that interface (i.e. online advertising)
  2. The making available to users of a multi-sided digital interface which allows them to be in contact with and to interact with each other, also to facilitate the direct supply of goods or services (i.e. social networks and online marketplaces)
  3. The transmission of data collected from users and generated from the use of a digital interface


Which companies or groups are affected by the Digital Services Tax?

For the DST to apply, an entity (or the group it is a part of) needs to satisfy both of the following conditions:

  • A total amount of worldwide revenue of at least EUR 750 million
  • A total amount of revenue from qualifying digital services in Italy of at least EUR 5.5 million. 


When does it apply in Italy?

For the DST to apply, the user of the services must be located in Italy. We'll define this by referencing the services mentioned in the previous section:

  • For Service 1 (i.e. online advertising): the user’s device appears to be in Italy when the advertising is delivered through the digital interface
  • For Service 2 (i.e. social networks and online marketplaces):
    • Where a user’s device seems to be in Italy; accesses the digital interface; and concludes a transaction
    • Where the user has an account for all or part of the calendar year which allows access to the digital interface; and opened that account using a device in Italy
  • For Service 3: Data generated from the user of a digital interface is from a device located in Italy



The taxable period for DST is the calendar year. The DST must be paid by the 16 February following the end of the calendar year in which the services were provided. A return must be submitted by 31 March of the same year.

Businesses with operations in Italy will have until the end of 2020 to decide whether they are within the net of the DST as the first returns are due in early 2021.

Multinational companies should review their internal and external global supply chains against the current international and domestic tax requirements in the countries in which they operate. Performing a review will ensure that they are not only compliant but also avoid potential non-budgeted future cash tax outlay.
If you would like to discuss this matter in more detail, please get in touch with the Vistra International Tax Advisory Team

Michael Jarvis 
Manager, International Tax Advisory
email: [email protected]

Tom Lickess
Global Head of Tax Advisory
email: [email protected]


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