Italy has handed tax demands to Meta and LinkedIn in the last formal step in an unprecedented VAT claim against the US tech giants that could have repercussions across the European Union, four sources with direct knowledge of the matter said.
The move on March 26 came after it had been reported that Facebook and Instagram parent company Meta and Elon Musk’s social network X were under investigation for alleged tax fraud.
It had not been disclosed that Microsoft’s LinkedIn unit was also caught up in Italy’s pilot VAT case for the tech sector in Europe.
Italy has claimed €887.6 million from Meta, €12.5 million from X and around €140 million from LinkedIn.
These figures referred to the entire period under investigation, from 2015-2016 to 2021-2022, depending on the case. The tax assessment notice now served only covers the years for which claims are set to expire, namely 2015 and 2016.
While the tax claims were relatively small for these companies, the case was seen as significant as it hinged on the way social networks provided access to their services.
Italian tax authorities argued that user registrations with X, LinkedIn and Meta platforms should be seen as taxable transactions as they implied the exchange of a membership account in return for a user’s personal data.
In a statement on March 26 to Reuters, Meta said it would not comment on the details of this case, reiterating that it had co-operated “fully with the authorities on our obligations under EU and local law”.
It added that the company “strongly disagrees with the idea that providing access to online platforms to users should be subject to VAT”.
LinkedIn said it had “nothing to share at this time”.
X did not respond to a request for comment.
The case could ultimately be extended to the 27-nation European Union since VAT is a harmonised EU tax and could force a rethink of the business model of the tech industry.
According to several experts consulted by Reuters, the Italian approach could affect almost all companies, from airlines to supermarkets to publishers, who linked access to free services on their sites to users’ acceptance of profiling cookies.
