ItalyTax on Digital ServicesVAT on Digital Services in Italy
VAT on Cross-Border Digital Services in Italy
Digital Services in the European Union(EU) are often referred to as electronically supplied services (ESS). Italy applies the harmonized EU VAT rules for ESS.
- For the B2B supplies of such services, the general place of supply rule for services has to be considered.
- For B2C supplies, the EU ESS rules should apply to foreign companies selling to Italy consumers (B2C).
Under the EU’s B2C ESS rules, until the sales value reaches EUR 10,000 (including distance sales of goods), the seller can charge VAT where it is resident. Once the sales exceed the threshold, the seller should register for VAT in Italy, or it can choose to account for the VAT under the EU’s One Stop Shop (OSS) regime.
VAT Rate: 22% VAT rate is typically applied to the sale of affected electronically supplied services (ESS).
Electronically Supplied Services (ESS) in Scope
Electronically supplied services include services that are delivered over the Internet or an electronic network and the nature of which renders their supply essentially automated and involving minimal human intervention, and impossible to ensure in the absence of information technology.
The following are examples of electronically supplied services:
- Website supply, web-hosting, distance maintenance of programs and equipment
- Supply of software and updating thereof
- Supply of images, text, and information and making available databases
- Supply of music, films, and games, including games of chance and gambling games, and of political, cultural, artistic, sporting, scientific, and entertainment broadcasts and events
- Supply of distance teaching
Communication via email between the service provider and its customer does not qualify as ESS.
Determining the Location of the Italian Consumer
The place of supply of electronically supplied services is the place where the customer of the service is established and has his permanent address, or habitual residence, regardless of whether the customer is a taxable person or a consumer and regardless of whether the supplier is established within or outside the European Union.
The Italian Legislature has not used the option for determining the location of the non-taxable person, which was granted by the Article 59-bis of Directive 2006/112/EC.
VAT Registration for Foreign Companies
Foreign companies can avoid VAT registration in Italy by using OSS after exceeding the registration threshold. The OSS simplifies the declaration of B2C sales of goods and services in the EU. It allows businesses to register electronically in one Member State and file a single VAT return for all eligible sales of goods and services across all Member States where the taxpayer has an obligation to report and remit.
Once the registration threshold is exceeded, the foreign taxpayer may choose to account for VAT under the EU's OSS scheme. Non-resident taxpayers should complete the ANR/3 form for VAT registration purposes.
- VAT registration threshold for intra-EU distance selling of goods and B2C telecommunications, broadcasting & electronic services (TBE): EUR 10,000 (net) per calendar year
- VAT registration threshold for non-resident, non-EU based suppliers of electronically supplied services (ESS): No registration threshold
- Fiscal representatives: If the supplier is not established in a European Union country, he must appoint a fiscal representative
VAT Returns and payment of taxes
VAT returns for non-residents
If registered, businesses must collect and remit taxes to the Italian Tax Authority using Dichiarazione IVA.
Italy does not provide simplified returns for non-resident companies. Instead, they can use the EU OSS return to remit taxes via another EU Member State and avoid VAT registration in Italy.
Digital Reporting Requirements for Cross-Border Digital Services
Reporting obligations only apply if the foreign company is VAT-registered in Italy and falls within the scope of reporting.
For more information about digital reporting requirements in Italy, see the E-invoicing and Digital Reporting page.
