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The now “famous” web tax (or Google tax) on the purchase of on-line ads and sponsored links on search engines might come into force on the 1st of March 2014 having an impact on the Internet liability regime, unless the Italian Government takes an immediate action to prevent it.As previously discussed, a law approved by the Parliament at the end of 2013 requested that the purchase of online ads and search engines sponsored links that can be showed on the Italian territory occurs only from entities that hold an Italian VAT number and such obligation applies even if the purchase is performed through media companies. Apart from the difficulty of identifying what kind of on-line ads can potentially not be showed on the Italian territory given the ubiquity of the Internet, the purpose of the law has been to oblige foreign companies like Google, Facebook and any search engines, but also for instance affiliate websites, travel websites, blogs and potentially any company on the web selling on-line advertising to hold an Italian VAT number.
In the last two months commentators have been trying to identify the effect of such obligation since the provision does not oblige to pay Italian VAT on purchases also because VAT is a type of tax governed at the EU level and its rules cannot be freely determined by Member States including Italy. The hope was that the tax authority would have provided some guidelines during the transitional period prior to its coming into force in July 2014. However, the Parliament decided not to ratify the law decree introducing the extension to the coming into force of the Web tax. And as a consequence, from the 1st of March 2014 the Web tax will come into with effect putting operators in a situation difficult to manage given the short term.
Everyone is hoping for an action of the Government aimed at either reintroducing the extension tomorrow or cancelling the law prescribing the web tax, but in absence of that actors of the on-line space shall quickly ensure to become compliant.
UPDATE
Following the publication of the article above the Government has now announced to cancel the web tax and therefore everything stands as it was before.
In any case, feel free to contact me, Giulio Coraggio (giulio.coraggio@gmail.com) to discuss, and as usual follow me on Twitter, Google+ and become one of my friends on LinkedIn.
Image courtesy of Flickr by Tax Credits
