Italy: Budget law expands scope of digital service tax

Law no. 207, known as the “2025 budget law,” expands the scope of the Italian digital service tax (DST). This law was published in the Official Gazette on December 31, 2024.

Prior law

Previously, the Italian DST, introduced on January 1, 2020, applied to revenues from certain digital services provided by businesses meeting two conditions: (1) total worldwide revenues of at least €750 million and (2) revenues from digital services in Italy of at least €5.5 million. The DST was payable on May 16 of the year following the year in which the taxable revenue was earned.

Changes introduced

The 2025 budget law introduced two major changes:

• It eliminates the second threshold (revenues from digital services in Italy of at least €5.5 million), meaning any business with worldwide revenues exceeding €750 million in the previous year is subject to DST if it earns any revenue from digital services.
• A payment on account system is introduced, requiring businesses to pay 30% of the previous year's DST liability by November 30, with the balance due by May 16 of the following year.

KPMG observation

These changes potentially widen the DST's scope, requiring corporate groups exceeding the €750 million threshold to assess their DST liability regardless of their revenue from digital services in Italy. The new rules, effective January 1, 2025, necessitate immediate procedural adjustments for affected businesses to determine taxable revenue and track DST exposure monthly.

Read a January 2025 report prepared by the KPMG member firm in Italy