Sources suggest the decision to withdraw was made shortly after Paddy Power and Betfair completed a merger last year.
The operator's 3.37% of online-only sports betting in Italy in September saw it break into the top 10 operators for online and retail sports betting, according to iGB's most recent Italy iGaming Dashboard (paywall), despite not running a retail business in the territory.
Confirmation of the exit comes amid reports of a potential tax rise for both land-based and online betting operators in Italy.
Various sources in the Italian media have said the current tax rate for land-based companies could rise from 18% to 19%, while online operators face a similar tax hike, with the rate set to increase from 22% to 23%.
Source: GMB / iGaming Business