Italy VAT on Data Center Colocation: Private Cage Ruling

Italian Revenue Agency issued Ruling No. 175/2026, in which it clarified the place of supply rules and related VAT applicability for the “private cage” colocation services where the data center is located in Italy. 

Data Center Colocation Services 

The Revenue Agency Ruling/Response was a “well-needed” explanatory note and guide in understanding the territoriality and VATability criteria for hosting services with the use of the real-estate space located in Italy. 

Through Response No. 175/2026, the Revenue Agency defines that data center colocation services, in case when they involve the exclusive provision of a limited area such as a “private cage”, constitute services relating to real estate pursuant to Article 7-quater, paragraph 1, letter a) of Italian VAT Decree No. 633/1972. 

Revenue Agency has emphasized that, to be able to properly identify the territorial classification and applicable tax regime for such transactions, there is a necessity to formalize the link between the service and the property based on the criteria of domestic and EU law. 

Data Center and Hosting Services

The applicant company, a cloud computing software company, received data center and hosting services on a B2B basis from the VAT-registered domestic company. The service provider issued tax invoices at the standard VAT rate.

The applicant company referred to the Revenue Agency that, under their understanding of the applicable law, the service provider should have issued tax-exempt invoices, as the principal service provided was “leasing of the premises”, and other services were ancillary to it. 

However, the Revenue Agency held in its Response a different position.

The provision of an exclusive space for the housing of a company’s servers, within a building to which the client has the right of access, together with the provision of other services such as electricity, maintenance, and interconnection between different data centers, for VAT territoriality is considered a “real estate” supply, under which the place of supply is where the immovable property is located.

This form of service, commercially described by the applicant company as “colocation services,” does not, however, fall within the scope of the rental or leasing of buildings, and therefore cannot benefit from the tax exemption but is taxable at the standard rate.

The Revenue Agency specified that for tax purposes, the question of the location of the service must be distinguished from that of the applicable tax treatment.

Place of Supply Rules

In summary, concerning the first question, the Revenue Agency stood the position that, in this case, the premises made available represent a specific and clearly identifiable portion of the building. Therefore, since the building is located in Italy, the service is performed in the country.

The Revenue Agency, in a step-by-step analysis, de-bundled the interconnected services to determine the taxability rules. The rental service is only a part of the complex service provided by the data center, however its accompanied by other technical and operational services without which the service agreement between the parties wouldn’t even be reached, as the primary service is the data colocation service. 

The complex mix of services cannot be exempt from VAT, following the presumption that the main service is the rental/leasing of the premises.