On 17 September 2026, the Italian Revenue Agency published Ruling No. 175, the first published ruling on the VAT treatment of data center colocation services in Italy.
The Case
The applicant
Alpha, through its secondary establishment in Italy, supplies cloud computing/hosting support to group companies in Italy. It owns servers located in Italy but has no local employees. Server activity is managed remotely.
The colocation agreement
Under a framework agreement, Alpha receives colocation services from Beta at Beta’s Italian data center: exclusive use of space in the data center, plus power supply, temperature control, connectivity between data centers, fire prevention, surveillance.
The “private cage”
The services relate to private cage housing servers, i.e. a secure area enclosed on four sides by mesh, with a locked access door, lockable cabinets, cross-connect interconnections and cable trays.
The Revenue Agency’s Opinion
According to the Ruling No. 175:
- the colocation services provided by Beta qualify as services connected with immovable property in Italy for the purposes of determining the place of supply of the services. As a result, the supply is relevant (i.e. taxable) in Italy for VAT purposes (Article 7-quater(1)(a) of the VAT Law);
- on the other side, for VAT rate purposes, these services do not qualify as the leasing of buildings or portions of buildings, which would be VAT exempt if certain requirements are met (under Article 10(1)(8) of the VAT Law);
- such services qualify as generic services that go beyond passive space rental, which is the true leasing of buildings within the meaning of the VAT Law;
- consequently, colocation services are subject to 22% VAT.
- The opinion is based on the EU VAT Law and makes reference to the judjment of the EU Court of Justice in the case C-215/19 (A Oy) of 2 July 2020.
Key Takeaways
Dual characterization – The Italian Revenue Agency adopted a different characterization of the colocation agreement for the purposes of (i) the place of supply of services and (ii) the applicable VAT rate.
Colocation agreement – The ancillary services provided alongside the leasing of portions (the “private cage”) of a data center building characterize the colocation agreement as a supply of general services for VAT rate purposes, rather than as a leasing of immovable property, thus excluding VAT exemption and reverse charge.
Fact-specific approach – A case-by-case analysis of the specific services is advisable to assess the VAT treatment of the specific agreement, considering the guidance provided by Ruling No. 175.