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Italy's 'Web Tax' Delayed For Six Months

by Ulrika Lomas,, Brussels

02 January 2014

The entry into force of the "web tax" that was introduced into the Italian 2104 Budget, but which has been the subject of much controversy since its approval on December 23, has been delayed from January 1 to July 1, 2014.

The legislation approved in the Stability Law includes an obligation for all purchases of online advertising or copyright in Italy to be effected through a business that is registered for Italian value added tax. It is hoped that the "web tax" will compel online multinationals, such as Google and Facebook, which currently sell advertising through intermediary companies based in countries with lower taxes, to establish a fiscal domicile in Italy.

The delay in the new tax was disclosed in the annual so-called "milleproroghe" decree, which renews, when required, a whole series of government measures. Given the controversy that has arisen over the tax, the Italian Government is expected to use the intervening six months to discuss its legitimacy with the European Commission.

Believed to be the first such tax in the European Union, doubts have been raised that the new tax is compliant with the single market's non-discrimination rules. However, opposition has also been voiced from outside Europe, particularly from the corporate interests that will be most affected, especially from within the United States.

In a note, Simone Crolla, the Managing Director of the American Chamber of Commerce in Italy (ACCI), commented that the authors of the "web tax" should reflect on the damage that their tax is doing to Italy's image in the eyes of the international business community.

Professing that the ACCI had received no response to its previous calls on the Government to discuss the issue, Crolla stressed that, "not only American businesses, but also all foreign companies in the digital sector, respect European fiscal laws, whether they are right or wrong."

He also pointed to "the enormous impact that these companies have on the development of Italy's digital economy, promoting the so-called 'app economy,' encouraging the birth of start-up technology … and improving managerial know-how. All of this does not occur in Ireland or Luxembourg, but in our country."

TAGS: compliance | tax | business | European Commission | value added tax (VAT) | tax compliance | commerce | VAT legislation | VAT cross-border transactions | law | copyright | internet | e-commerce | multinationals | legislation | Italy | United States | VAT compliance matters | Europe

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