Italy: platform use in exchange for user data is barter; VAT base is the data’s value
The Italian tax administration has assessed additional output VAT to a platform on which users can register and use it free of charge. According to the tax administrator, this involves the provision of services for consideration, more precisely barter in exchange for user data. To be able to access and use the platform free of charge, users agree to the commercial use of the data provided, under the general terms and conditions. In the tax administrator’s opinion, the tax base for calculating VAT should therefore be the value of the data.
The platform concerned provided its Italian users with registration and use free of charge if they transferred to the platform the right to commercially exploit their personal data. The Italian tax administration initiated proceedings with the platform to assess additional output VAT for the 2015 to 2021 taxable periods. In its view, the arrangement did not involve the provision of access free of charge but the provision of access in exchange for the right to commercially exploit the data, i.e., a service subject to VAT. For the seven-year period in question, VAT amounting to approx. EUR 870 million should have been declared in tax returns and subsequently paid, said the tax administrator.
The question of VAT treatment of online services provided in exchange for user data was addressed by the EU VAT Committee. At the 111th meeting of the Committee of 30 November 2018, the member states unanimously agreed that the provision of IT services to internet users in exchange for the use of their personal data shall not be a taxable supply as long as these services are offered under the same conditions to all internet users regardless of the quantity and quality of personal data provided, in such a way that there is no direct link between the IT services provided and the consideration in the form of acquired data.
Although it is questionable to what extent the approach of the Italian tax administration corresponds to the recommendations of the EU VAT Committee (which are not binding), we recommend all platforms (not only those with users in Italy) proactively revise their general terms and conditions, in particularly focusing on the above provision of personal data which is often a condition for the gratuitous use of the platform.