Exclusive: Meta, X and LinkedIn appeal unprecedented VAT claim by Italy
This is the first time that Italy has failed to reach a settlement agreement after bringing tax cases against tech companies, resulting in a fully-fledged judicial tax trial being launched.
According to the sources, this came about because the case went beyond agreeing on a settlement figure and sought to establish a broader approach focused on how social networks provide access to their services.
Italian tax authorities argue that free user registrations with X, LinkedIn and Meta platforms should be seen as taxable transactions as they imply the exchange of a membership account in return for a user's personal data.
The issue is especially sensitive given wider trade tensions between the EU and the administration of U.S. President Donald Trump.
Italy is claiming 887.6 million euros ($1.03 billion) from Meta, 12.5 million euros from X and around 140 million euros from LinkedIn.
Meta, the parent company of Facebook and Instagram, Elon Musk's social network X and Microsoft's (MSFT.O), opens new tab LinkedIn filed their appeals with a first instance tax court after mid-July, when the deadline for responding to a tax assessment notice issued by Italy's Revenue Agency in March passed.
According to several experts consulted by Reuters, the Italian approach could affect almost all companies, from airlines to supermarkets to publishers, who link access to free services on their sites to users' acceptance of profiling cookies.
It could also eventually be extended across the EU where VAT is a harmonised tax.
In a statement to Reuters, Meta said that it had cooperated "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 from Reuters.
It is uncertain whether a full trial of the matter, which involves three levels of judgement and takes an average of 10 years, will go ahead.
Following discussions with the three companies, Italy is preparing as a next step to seek an advisory opinion from the European Commission, the sources said.
The Italian Revenue Agency will have to prepare specific questions, which the Economy Ministry will then send to the EU Commission's VAT Committee, which meets twice a year.
Rome aims to submit its questions for the meeting scheduled to be held by early November, in order to receive the EU's comments in time for the following meeting in spring 2026.
Italy's Economy Ministry and Revenue Agency declined to comment.
The EU Commission's VAT Committee is an independent advisory group. While its assessment will be non-binding, a "No" could prompt Italy to halt the case and ultimately drop the criminal investigation by Italian prosecutors, according to the sources.
The dispute is one of several between Europeans and U.S. Big Tech.
On July 11 Reuters exclusively reported that Meta would not be tweaking its pay-or-consent model further despite the risk of EU fines.
According to a Financial Times report on July 17, the European Commission has stalled one of its investigations into Musk's platform X for breaching its digital transparency rules while it seeks to conclude trade talks with the U.S.
($1 = 0.8588 euros)
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Daily Mail
34 minutes ago
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Phase three is transformation – where AI adoption potentially boosts productivity, creating new business models and industries.' However, Palmour believes the industry is still in 'phase one' with hyperscalers 'sticking with increased capital spending – and being rewarded for it' with bumper earnings and share price gains. He said: 'We still like the hardware makers and those sectors benefitting from the buildout. 'Utilities are key AI beneficiaries, with AI mentions in earnings calls far outpacing the S&P 500 average. 'We see this interest persisting as data centres drive soaring power demand and a greater need for flexible, reliable supply.' 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AXA Framlington Global Technology currently allocates 32.44 per cent of its assets to semiconductor and semiconductor equipment, while software makes up 25.23 per cent, according to FE Fundinfo data. US-based cloud companies Snowflake and Datadog, and supply chain platform JFrog are among the firm's software holdings. Ward added: 'If you look at Salesforce, for example, pure AI revenues are a drop in the ocean in terms of their overall business. 'But you look at Microsoft, it's a material number now - it's not a drop in the ocean. 'It isn't a concern for us - we just think we're very early here. 'We see the money coming through and being spent, and the forecast only going up.' Gerrit Smit, head of global equity management at Stonehage Fleming Investment Management UK, says it is difficult to have 'full confidence' in much of the sector, which remains volatile and often unprofitable. His firm's focus has been on physical infrastructure names like Amphenol, which cables and connectors for data centres, as well as more established software names like Amsterdam-listed Tencent shareholder Prosus. Smit said: 'The benefits of AI are starting to be realised in different forms. Corporate AI uptake is very strong, so there's no reservation about that. 'We see it in many company presentations now, they will make a point of the difference that AI is going to make for them.'
