European Union Member States were required to implement new legislation by January 1, 2015 transposing an EU Directive on the place of supply of digital services into domestic law.
Bravo, and bravissimo to the 27 EU Member States who met the deadline.
The only Member State to have missed it is ... Italy.
Draft legislation approved by the Italian government is currently being reviewed by the Special Committee of the Italian Parliament for final approval. It is anticipated that the legislation will enter into effect within the next month.
The new rules address the place of supply of sales to final customers of digital services such as e-books or digitally supplied software. Under the pre-2015 rules, the place of supply of these services was the Member State of the supplier. This gave suppliers a strong incentive to sell from a base in a low-VAT jurisdiction such as Luxembourg. Under the new rules, the place of supply of these services is the Member State of the recipient.
So what are the implications of Italy's failure to implement the new rules.
For EU suppliers selling digital services to Italian customers – not much. These services will still be subject to VAT in Italy under the EU Directive. However, if an Italian supplier makes a supply to a customer in another EU Member State, he could potentially be subject to double tax – in Italy (under Italian domestic law, with a standard rate of 22 percent), and in the Member State of the EU recipient (in accordance with the EU Directive).
In practice, however, it appears that Italy is unlikely to subject its digital suppliers to an extra layer of Italian VAT.
Grazie mille, Signore.
For more information, see Bloomberg BNA’s VAT Navigator and the January 2015 edition of the Indirect Taxes Journal for Mariacristina Scarpa’s article, Italy: Place of Supply Rules and the Consequences of Missed Deadlines.
Access even more in-depth analysis and expertise with a free trial to the Premier International Tax Library.
By Joanna Norland, Technical Editor, VAT Navigator
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)