Italy’s Revenue Agency has ruled that dedicated private-cage data centre colocation constitutes a single complex supply linked to immovable property and subject to the standard 22% VAT rate, confirming the validity of input VAT credits arising from the services.
The Italian Revenue Agency (IRA) has published Ruling No. 175 of 17 September 2026, clarifying the VAT treatment of data centre colocation services. The ruling responds to a query from a foreign cloud computing company operating through an Italian branch.
A technology company, referred to as Alfa, seeks clarification on whether renting a “private cage” for its servers should be classified as a generic service, a tax-exempt real estate lease, or a service specifically tied to immovable property.
Ruling No. 175 provides definitive guidance on how data centre colocation contracts featuring dedicated physical enclosures (“private cages”) are classified for Value Added Tax (VAT) purposes under Italian and EU law.
Factual background & the dispute
A foreign cloud computing and hosting provider operating in Italy through an Italian branch entered into an agreement with an Italian data centre operator for colocation services in a dedicated private cage.
The package included secure server space and related infrastructure and technical services, such as continuous power supply, climate control, inter-data centre connectivity, fire prevention, and physical security.
The Italian operator charged VAT at the standard rate, generating a significant input VAT credit for the cloud provider. Alfa therefore sought an interpello ruling from the Italian Revenue Agency to confirm whether the VAT treatment was correct and whether the resulting input VAT could be reclaimed through its annual Italian VAT return.
The three potential VAT classifications
Alfa asked the Italian Revenue Agency to clarify which VAT rule applies to private-cage colocation services. The company considered three possible treatments: VAT-exempt leasing of commercial property under Article 10(1)(8) of DPR No. 633/1972; services connected with immovable property, subject to the location of the property under Article 7-quater(1)(a), reflecting Article 47 of the EU VAT Directive; or the general B2B place-of-supply rule under Article 7-ter, under which services are generally supplied where the customer is established.
Taxpayer’s (Alfa’s) position
Alfa argued that the private-cage arrangement constitutes a single, complex supply, with the exclusive use of a specific, identifiable area of the data centre as its principal element. It considered the electricity, cooling, security, and fire protection services ancillary under Article 12 of DPR 633/1972, as they support the use of the allocated space.
Accordingly, Alfa maintained that the service falls under the immovable property-related place-of-supply rule in Article 7-quater(1)(a) and is taxable in Italy. It rejected both the VAT exemption for passive property leasing and the general B2B rule under Article 7-ter.
Legal framework & EU judicial precedents
The Revenue Agency assessed the issue under EU VAT rules and CJEU case law. Under Article 47 of Directive 2006/112/EC and Article 31-bis(1) of Implementing Regulation No. 282/2011, a service qualifies as related to immovable property only where there is a sufficiently direct connection, meaning the property is essential and indispensable to the service. The Agency also distinguished the CJEU’s A Oy case (C-215/19), which found that standard data-centre rack colocation in shared space does not constitute an immovable-property service and that arrangements combining space with active technical and maintenance services do not qualify as exempt passive property leases.
Revenue agency’s ruling & analysis
The Revenue Agency ruled that the private-cage colocation arrangement constitutes a single complex supply subject to Italy’s standard 22% VAT rate. Because Alfa has exclusive, locked access to a specific and clearly defined area of the data centre, the property is considered an essential and indispensable element of the service.
The Agency therefore applied Article 7-quater(1)(a) of DPR 633/1972, making Italy the place of supply rather than applying the general B2B rule under Article 7-ter.
However, the territoriality rule does not confer VAT exemption. As Beta provides continuous technical services, including power, cooling, monitoring, and connectivity, the arrangement is an active commercial service rather than passive property leasing and therefore does not qualify for the Article 10(1)(8) exemption.
Key takeaway & conclusion
The Revenue Agency confirmed that Beta correctly charged Italian VAT on its private cage colocation invoices. Consequently, Alfa’s resulting input VAT credit is legally sound, and Alfa is entitled to claim its VAT refund on its annual Italian VAT return.
