Italian law aims to encourage foreign internet companies to pay more tax

by Davide Anghileri

Italian legislation proposed May 22 would increase tax collection from foreign multinationals that have online activities in Italy.

Under to the new proposal, multinationals with total annual revenues of more than 1 billion euros that have sales in Italy exceeding 50 million euros are encouraged to enter into negotiations with the Italian revenue agency to reach agreement regarding their tax position.

If a multinational is found have a permanent establishment in Italy, it can not only agree on its future tax bills, but also regularize its previous tax position to avoid disputes. The proposal reduces by 50 percent any administrative sanctions and waives any penalty for the offense of omission. As such, the measure seems more of a voluntary disclosure mechanism than new tax on web companies.

Francesco Boccia, who heads Italy’s lower house budget committee and who proposed the amendment, estimated that the new measure will bring in an additional one billion euros in tax revenue this year.

The real effectiveness and strength of the measure is unpredictable, though, because, typically, multinationals structure their affairs to be both compliant with local tax laws and to minimise tax bills.

However, recent events may indicate that web multinationals are more keen to reach agreement with the Italian tax administration to settle their tax bills.

Last December Apple paid 318 million euros to the Italian Revenue Agency to settle a tax dispute; in May, Google agreed to pay 306 million euros; and Amazon is now under investigation for allegedly evading 130 million euros in taxes between 2011—2015.

Davide Anghileri

Davide Anghileri is a PhD candidate at the University of Lausanne, where he is writing his thesis on the attribution of profits to PEs. He researches transfer pricing issues and lectures for the Master of Advanced Studies in International Taxation and Executive Program on Transfer Pricing.

Anghileri, a Contributing Editor at MNE Tax, previously worked as a policy advisor to the Swiss government on BEPS issues. He can be reached at danghileri@yahoo.it.

Davide Anghileri

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