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Tax Pills

  • Italy: here is the new web tax that will apply from 1 January 2020 - 2


    The double approval of the new Budget Law 2020 has given the definitive green-light for the entry into force of the new Italian web tax, indeed in a revised form compared to that already approved last year by the past Budget Law for 2019. In any case, the most important feature to note is that the Digital Services Tax (DST) is applicable from 1st January 2020 even if fully effected, would be however repealed when, and if, the internationally agreed provisions on digital economy taxation, managed at the moment by the OECD, became applicable. That's the effect of the so-called sunset clause, which is generally a part of a law, or contract, which states when it will end.
    To which subjects does the new digital tax apply – First of all, the DST applies to revenues resulting from the provision of certain digital services obtained during a calendar year. The new taxable subjects substantially are businesses that, individually or in a group-wide entity, meet both of the following conditions in the calendar year before the one in which the taxable revenues are obtained: ● on a worldwide base, they have accounted a total revenues of not less than EUR750 million; ● they have obtained in Italy revenues of not less than EUR5.5 million from the digital services provided.

    Taxed services - The new web-tax will be calculated on the revenues resulting from the provision of the following services: ● the placing on a digital interface of advertisings targeted at users of that interface; ● the making available to users of a multi-sided digital interface which allows them to be in contact and to interact with each other, and which may also facilitate the provision of underlying supplies of goods or services directly between users; ● the transmission of data collected from users and generated from the use of digital interfaces. However, such revenues will not be taxed if the services are supplied to companies that are deemed to be parent, subsidiary or sister companies as per article 2359 of the Italian Civil Code.
    How the tax due is calculated the new digital services tax will be calculated by applying the 3% rate to the amount of taxable revenues obtained by the taxable subject during the calendar year. Taxable entities or individuals, will have to pay the DST by February 16 of the calendar year following the one in which the taxable revenues have been realized. The same taxable subject will have to file an annual specific return to declare the taxable services by March 31 of the same year. For companies belonging to the same group, a single company can be appointed to fulfill the obligations resulting from the DST provisions in place of all other firms. Non-established subjects, without a permanent establishment in Italy or Italian VAT registration shall, if they qualify as digital service taxable entity, obtain an ad hoc DST identification number by submitting an application to the Italian Revenue Agency. The application will follow the procedures fixed by the Director of the Revenue Agency. As far as the DST assessment, penalties, collection and litigation are concerned, the Italian VAT rules shall apply, if compatible. However, the Director of the Revenue Agency will issue one or more Revenue Agency decrees establishing how to apply the DST.
    When the new tax will debut? – As already said, the above provisions shall apply from 1st January 2020. Yet, it’s important to point out that the Italian DST can be repealed if and when the internationally agreed provisions on digital economy taxation became applicable in the future.

    Stefano Latini

    the first part on 4 December 2019

  • Taxation of income from professional activities invoiced in Italy but perceived in Spain the following year by an Italian taxpayer


    Under certain conditions, our country, Italy, still retains the power to tax incomes deriving from the exercise of an independent activity carried out in 2018 in the Italian territory, although these compensations have been successively perceived, and precisely in the following year, in 2019 in this case, by a recipient who is no longer resident in Italy. In fact, as recently clarified by the Revenue Agency through a specific ruling, or interpello 512, of 11 December 2019, the tax treatment, for income tax purposes, of remuneration for self-employment activities invoiced in a tax period prior to that of actual perception, in which the recipient is no longer resident in Italy, does not contribute to the determination of the income from self-employment in relation to the invoicing tax period, but in that of actual collection, according to the application of a fiscal principle known as “principio di cassa”. From this basic standard on fiscal matters origins the two way tax treatment, with a withholding tax of 20% or in alternative 30%, to apply on self-employment incomes, first of all if invoiced in a tax period prior to that of actual perception, and secondly in case the recipient is no longer resident in Italy. Therefore, these two conditions are essential.

    The interrogation - The present ruling stems from a request raised by a taxpayer demanding specific clarifications on the tax treatment of remunerations he perceived for some professional services invoiced during the last months of 2018, when he still resided in Italy, but collected in 2019, when no longer was an Italian resident, having transferred his tax residence in Spain and therefore he could not be considered fiscally resident in Italy anymore.

    Two ways of taxation and two rates, at 20 or 30 percent - Particularly, the answer provided by the Italian Revenue Agency illustrates and explains how and why, first of all, the remuneration will still be subject to taxation in Italy, based on the “cash principle” as aforementioned, and how, secondly, the rate to be applied will be equal to 30 percent , not at 20 percent, being the applicant a professional who now resides for tax purposes abroad, no longer in Italy, and particularly in Spain. In fact, according to domestic law, the income from self-employment falls among those subject to withholding tax, yet if the fees and other sums are paid to non-resident subjects, continue the Agency, a withholding tax of 30 per cent must be made, with the exclusion of remunerations for self-employment provided abroad and of compensations paid by permanent establishments in Italy to non-resident subjects. This means that for the case under scrutiny, in order to differentiate the related tax treatment, it is the existence of tax residence or not in the Italian territory of the professional to be decisive. In the case in question, the requester has placed his tax residence in Spain at the moment he perceived the incomes invoiced the year before in Italy. Therefore, no longer been resident in the Italian territory, on the professional incomes received will be applied a 30per cent withholding tax rate. This clarification is also in line with the provisions of the Convention between Spain and Italy for the avoidance of a double taxation with respect to taxes on income, particularly with article 14 on the tax treatment of professional services.

    Stefano Latini