Italy Loosens “Google Tax”, But Maintains its Necessity

December 19, 2013 Taxation in Italy

ROME – Italy has confirmed that online businesses must pay taxes in the countries where their profits arise, and still hopes to raise tax revenues from as early as next year .

Late on December 17th the Budget Committee of the Lower House of the Italian Parliament amended the proposed bill, which has already been called in the national media Google Tax, reducing the list of online business activities falling under the scope of the national tax regulations.

Under the originally proposed rules for the Google Tax, which have now been overturned, any entity drawing online profits from Italian customers, could only do so through a businesses residing in Italy for the purposes of tax legislation, and could not do it directly from overseas or through an overseas registered company, and these measures, according to the government, would force online retailers and advertisers to pay income taxes in Italy.

The rules were first proposed earlier this year, and its implementation was initially estimated to raise as much as EUR 1 billion in additional tax revenues per year, however, even such a positive prognosis was met with immediate opposition from the business society, claiming that that such prohibitive rules may isolate Italy from the rest of the world in terms of the further development of a modern retail system.

In order for the Google Tax to be enacted it must be finally approved by both houses of Italian Parliament and if it is approved in the next two weeks, then it may still be included in the country’s 2014 budget package.

Photo by: Robert Scoble