An audit by Italy's financial police claims that Meta user registrations could be seen as a taxable transaction since they imply the non-monetary exchange of a membership account for the user's personal data.
ADVERTISEMENTAn Italian tax claim against Meta has been escalated to the European Commission's VAT committee for evaluation, three sources with direct knowledge of the matter told Reuters.
The US-based company, which owns Facebook, Instagram and WhatsApp, among others, faces a potential tax bill of around €870 million in Italy after Milan prosecutors launched an investigation into the firm based on a tax police audit.
Although it is a modest sum for a company that brought in more than $32 billion (€29 billion) in revenue last year, the case could have much wider consequences as it depends on how Meta provides access to its services.
The audit, devised and carried out by Italy's financial police Guardia di Finanza, claimed Meta user registrations could be seen as a taxable transaction since they imply the non-monetary exchange of a membership account for the user's personal data.
The company has repeatedly stated that it strongly disagrees with the idea that providing access to online platforms to users should be subject to sales tax (VAT - value-added tax).
The three sources, according to Reuters, said that because of the sensitivity and unprecedented nature of the issue, the Italian tax agency sent a request in September for a technical evaluation to the European Commission's VAT committee via the national government's Department 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' data.
The EU VAT committee's assessment - the timing of which is unknown - will be non-binding. However, a "no" from it could push the ministry and the tax agency to stop challenging Meta, and ultimately to drop the criminal investigation by Milan prosecutors as well, the sources said.
Since VAT is a harmonised tax at the European level, if this was deemed to apply in Italy, it would automatically apply to all other EU member states.
Such tax treatment could also be extended in the EU to all other multinational internet platforms that use the free access mode in exchange for user data.
A European Commission spokesperson declined to comment directly on the issue, noting that the VAT committee was 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, and Meta did not immediately respond to a request for comment.
The Guardia di Finanza calculated a model under which Meta would have had to pay around €220 million of VAT locally in 2021.
They also calculated that the VAT due for 2015-2021 would be a total of €870 million.
Italy has pursued other tech companies over taxation. Property rental platform Airbnb said this month it would pay €576 million to the Italian Revenue Agency to settle outstanding income tax obligations for 2017-2021.
