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Strong Support For Italy To Introduce a New "Digital Tax"

Strong Support For Italy To Introduce a New "Digital Tax" 0001
  • A proposed "Digital Tax" in Italy may cost regulated online gaming companies a 25 percent withholding tax.

  • Support grows for Italy's new "Digital Tax", which could make it more expensive for regulated iGaming operators.

It could become more expensive for regulated online poker operators to offer services in the ring-fenced Italian marketplace thanks to a proposal to introduce a new "Digital Tax" beginning January 1, 2017. Economy Undersecretary Enrico Zanetti confirmed that if the tax becomes law, it will be levied on online gambling transactions.

According to Poker Industry Pro, the proposed new tax has the support of Italy's Prime Minister Matteo Renzi, who was initially opposed to such an idea when it was originally presented two years ago.

The proposed "Digital Tax," also known as the "Web Tax," is expected to levy a 25 percent withholding tax to companies that have been transacting over the Internet for at least six months in amounts of €5 million or more.

The idea behind the proposal is for taxes to be levied when a transaction over the Internet is conducted from a person residing in Italy, regardless of where the company may be located. It is believed that the proposed tax should help stem tax evasion in the country, which according to a study by Milan University, Politecnico di Milano, resulted in €11 billion in e-commerce revenues in 2013.

It is clear that each company that has a significant ongoing activity and in our country must be subject to the same tax rules as companies based in Italy.

Gaming law firm DLA Piper outlines the proposal on its blog:

  • The setting up of a new concept of permanent establishment in Italy (which should cover also a “virtual permanent establishment” in line with the OECD approach).
  • The application of a 25% withholding tax to be applied by the financial institution processing the payments made to a foreign e-commerce provider by an Italian customer (B2C transaction).
  • The application of a 25% withholding tax to be applied where it is identified a hidden “virtual permanent establishment” on payments made by an Italian company to a foreign e-commerce provider (B2B transaction). Also in this case the withholding tax is applied directly by the financial institution processing the payment process.

One reason Renzi may have changed his position is that it is in line with both the introduction of a Point of Consumption (PoC) tax in the United Kingdom and the Europe's new digital VAT regime, which began its enforcement earlier this year.

"The rules have as their object the worldwide web," Zanetti explained to gaming news provider Agimeg. "So it is clear that each company that has a significant ongoing activity and in our country must be subject to the same tax rules as companies based in Italy."

While things are certainly looking glum for online gaming companies in Italy. The country's regulated online poker market has already been experiencing steady decreases, and a new tax will put a further dent to the bottom line of online gaming operators. Despite these declines, online gaming appears healthy in the country with online casino gambling and sports betting experiencing steady increases.

Furthermore, the country is considering sharing liquidity with other countries, which if enacted should help both existing operators make their offerings more attractive to its customers, and enable smaller gaming operators to potentially apply for a gaming license.

Back in June, DLA Piper's gaming lawyer Giulio Coraggio predicted that "Italian gaming laws are going to be considerably amended as part of the so-called Delega Fiscale law which, among others, is likely to change the regime of sports betting and poker tournament to 20-percent Gross Gaming Revenue (GGR)."

Coraggio believes this is one of the necessary steps to help turn things around stating that "if poker international sharing liquidity will be allowed, the scenario might considerably change."

Stay tuned to PokerNews as more develops in the Italian gaming marketplace.

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