Italy hits Meta, X, LinkedIn with €1 billion VAT bill in landmark case

Italy has issued tax demands to Meta, X, and LinkedIn in an unprecedented case that could have far-reaching implications for the European tech industry. According to an Exclusive report by Reuters, the country’s tax authorities are seeking nearly €1 billion in value-added tax (VAT) payments from the companies, arguing that user registrations on their platforms constitute taxable transactions.

The Italian authorities claim that Meta, parent company of Facebook and Instagram, owes €887.6 million, while X, formerly Twitter, faces a €12.5 million demand. LinkedIn, owned by Microsoft, is being pursued for approximately €140 million. These assessments primarily cover the tax years 2015 and 2016, as claims for those years are nearing expiry.

This marks the first instance where Italy has formally assessed major tech firms for VAT obligations rather than negotiating a settlement. The case hinges on the argument that access to these platforms, in exchange for user data, should be classified as a taxable service. If upheld, the ruling could set a precedent across the 27-nation European Union, where VAT is a harmonised tax.

The companies now have 60 days to appeal the tax assessment, with an additional month available if they request a settlement proposal. If the dispute proceeds to court, it could take up to a decade to resolve through Italy’s three-tier judicial system. Alternatively, the authorities could withdraw the claim for legal or political reasons, or negotiate an initial payment while seeking guidance from the European Commission.

Italy has previously secured tax settlements from other technology firms, with Google agreeing to pay €326 million earlier this year for a separate tax dispute covering 2015-2019. However, this case signals a shift in Italy’s approach, potentially challenging the business model of digital platforms that rely on user data in exchange for services.