Italy: Revenue Agency ruling on application of the Digital Services Tax to targeted advertising services (Response No. 149/2022)

On 22 March 2022, the Italian Revenue Agency issued a ruling on the application of the Digital Services Tax (DST) to targeted advertising services. The ruling was given in response to a request from ALFA, a company engaged in editorial production and online advertising (ads) sales. It sought clarification on whether DST applies to revenue from programmatic advertising when it lacks control over user profiling and ads using geolocation data inferred from internet service providers (ISPs). The ruling clarified that DST applies to revenues from targeted advertising, including programmatic advertising facilitated by intermediaries. The ruling confirms that publishers and other operators involved in conveying targeted ads are taxable if they meet the applicable revenue thresholds, regardless of whether they control the targeting criteria. The ruling also clarified that the DST applies to programmatic advertising revenue, including Preferred Deals and Open Auction, unless a company can prove that ads are purely content-based and do not involve user profiling. It also confirmed that DST covers advertising based on geolocation data, regardless of whether the data is derived from user consent or inferred from internet service providers. The ruling emphasises that DST applicability depends on whether user data is used at any stage of the advertising process, rather than on a company’s direct control over profiling.