Meta, X, LinkedIn appeal Italy's €1 billion VAT claim

US tech companies Meta, X, and LinkedIn have formally appealed a VAT claim from Italy. This action initiates a legal challenge regarding the taxation of digital services across the European Union.

A Reuters report indicates that the companies filed appeals with Italy's first-instance tax court in mid-July. This follows a failure to reach a settlement with Italian tax authorities. This case marks the first instance where Italy has pursued full trial proceedings against major tech companies, departing from prior negotiations that often concluded in settlements.

The core of the dispute involves Italy's interpretation of value-added tax rules. Authorities contend that users registering for free access to platforms like Facebook, Instagram, X, and LinkedIn should be considered a taxable event. The rationale is that users provide personal data in exchange for a membership account, which authorities consider an economic transaction.

Potential Broad Implications

Should Italian courts uphold this interpretation, it could affect various businesses beyond social media. This includes airlines, retailers, and publishers that offer digital access in exchange for user data or consent for profiling.

The Italian Revenue Agency seeks €887.6 million from Meta, €12.5 million from X, and approximately €140 million from LinkedIn. These claims were issued in March, and the companies' appeal followed their mid-July response deadline.

Meta stated it had "cooperated fully with the authorities" but "strongly disagrees with the idea that providing access to online platforms to users should be subject to VAT." LinkedIn declined comment, and X has not responded to inquiries.

EU Advisory Opinion Sought

Italy is preparing to request an advisory opinion from the European Commission. Questions are expected to be submitted by the Economy Ministry to the EU's VAT Committee by early November, with a response anticipated by spring 2026.

While non-binding, a negative opinion from the committee could lead Italy to abandon the VAT claim and suspend related criminal investigations. Legal experts suggest that if endorsed, Italy's approach could impact VAT rules across the 27-nation EU, where VAT rules are broadly harmonized.

This dispute occurs amid ongoing tensions between US tech companies and European regulators. Reuters previously reported that Meta will not change its "pay-or-consent" data model despite scrutiny from Brussels. Separately, the Financial Times reported that the European Commission has paused a probe into X, reportedly to maintain momentum in transatlantic trade talks.

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