European Commission examines Italy’s Meta tax case – sources

By Emilio Parodi

MILAN (Reuters) – An Italian tax claim against Meta, Facebook’s parent company, has been referred to the European Commission’s VAT committee for assessment, three sources with direct knowledge of the matter told Reuters in a test case about how the technology sector is taxed.

The U. S. company, which also owns Instagram, WhatsApp and Oculus platforms, faces a potential tax bill of around 870 million euros ($954 million) in Italy after Milan prosecutors opened an investigation into the company for a tax police check.

While that’s a modest sum for a company that generated more than $32 billion in profits last year, the case may have much broader ramifications, as it depends on how Meta delivers services.

The audit, designed and conducted by Italy’s Guardia di Finanza (GdF) police, claimed that Meta’s user registrations may simply be a taxable transaction because they concerned the non-monetary exchange of a member’s account for non-public user data.

Meta has continually stated that it strongly disagrees with the idea that offering access to online platforms to users is subject to sales tax (VAT).

The 3 appeals said that due to the sensitivity and unprecedented nature of the issue, the Italian fiscal directorate sent a request for technical evaluation in September to the European Commission’s VAT committee (the Italian government’s Ministry of Finance).

The requested opinion concerned the VAT treatment of online services provided by the social network in return for the provision of its users’ personal data, the sources added.

The Commission’s assessment of the EU’s VAT, the timing of which is unknown, will be binding, but a “no” could push the ministry and fiscal management to avoid challenging Meta and ultimately abandon the criminal investigation through Milan prosecutors. the sources say.

However, VAT is a harmonized tax at the European level, so if it were applicable in Italy, it would automatically be applicable for all other EU member states.

In addition, such a tax solution could be extended in the EU27 to all other multinational web platforms that use the flexible access mode in exchange for user data.

A European Commission spokesperson declined to comment directly on the matter, stressing that the VAT committee is an independent advisory group.

“The VAT Committee regularly deals with issues raised by Member States and both the outcome and the timeframe depend on the agenda,” the spokesperson said.

The Italian tax agency declined to comment on the issue.

Meta did not respond to a request for comment.

The police and the GdF tax government calculated an estimate according to which Meta would have had to pay around €220 million in sales tax in 2021. They also calculated that the VAT due for the period 2015 to 2021 would amount to a total of €870 million.

Italy has sued tech corporations for taxes. Property rental platform Airbnb announced this month that it would pay $576 million to Italy’s Tax Agency to settle its unpaid tax liabilities for 2017-2021 ($1 = $0. 9122).

(Reporting by Emilio Parodi; Editing by Keith Weir and Jane Merriman)

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