Tax Dispute: Meta’s Faces EU Evaluation
A tax dispute involving Facebook’s parent company, Meta’s, has reached a critical stage, as Italy escalates the issue to the European Commission’s VAT committee for assessment. This case, seen as a litmus test for how the tech sector is taxed, could result in Meta facing a potential tax bill of approximately 870 million euros ($954 million) in Italy.
The investigation was initiated by Milan prosecutors following a tax police audit conducted by Italy’s Guardia di Finanza (GdF) police. The audit argues that Meta’s user registrations might be considered a taxable transaction, as they involve the non-monetary exchange of a membership account for the user’s personal data.
While the sum in question is relatively small for a company with over $32 billion in revenue last year, the implications are significant. Meta vehemently disagrees with the notion that providing access to online platforms should be subject to sales tax (VAT).
Seeking EU Assessment
Due to the unprecedented nature of the issue, Italy’s tax agency sought a technical evaluation from the European Commission’s VAT committee through the Department of Finance in September. This request focused on the VAT treatment of Meta’s online services, provided in exchange for users’ personal data.
The assessment by the EU VAT committee, whose timing remains unknown, will be non-binding. However, a negative outcome could prompt the Italian ministry and tax agency to cease their challenge against Meta, potentially leading to the discontinuation of the criminal investigation by Milan prosecutors.
As VAT is a harmonized tax across the European Union, a decision in favor of Italy could automatically extend the tax obligation to all EU member states. This could impact not only Meta but also other multinational internet platforms employing a similar free access model in exchange for user data.
European Commission’s Response
A spokesperson for the European Commission declined to comment directly on the issue, emphasizing the independent nature of the VAT committee. The Italian tax agency and Meta did not provide immediate comments on the matter.
The GdF police and tax agency proposed a model wherein Meta would be required to pay around 220 million euros in local sales tax for 2021. The calculated VAT for the period from 2015 to 2021 amounted to a total of 870 million euros.
Italy has previously pursued taxation issues with other tech companies, with Airbnb recently agreeing to pay 576 million euros to settle outstanding income tax obligations for the years 2017-2021.
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