Facebook parent company Meta faces a possible tax bill of around 870 million euros ($925 million) in Italy after prosecutors launched an investigation into the corporate, two sources with direct knowledge of the matter said on Wednesday.
The investigation was opened by Milan magistrates on the request of the European Public Prosecutor’s Office (EPPO), which asked the Guardia di Finanza police and the Italian Revenue Agency to ascertain if there may be a case for user registrations to be subject to tax.
“We strongly disagree with the concept providing access to online platforms to users needs to be charged with VAT,” a Meta spokesperson said in an emailed statement to Reuters.
The spokesperson added that the corporate takes its tax obligations seriously, pays all taxes required within the countries where it operates and can fully cooperate with the authorities.
The EPPO, which relies in Luxembourg, said it didn’t comment on ongoing investigations nor wouldn’t it publicly confirm which cases it was working on.
News of an administrative tax audit into Meta was first published on Wednesday by the Italian day by day Il Fatto Quotidiano.
The 2 sources said that investigators consider that free membership on Meta platforms is available in return for access to user data and needs to be classified as an exchange of services, due to this fact subject to VAT sales tax.
ROLE OF FREE ACCESS
Italy’s tax police and revenue agency calculated a model under which Meta would have needed to pay around 220 million euros of sales tax in Italy in 2021, in accordance with the sources.
The figure for the period back to 2015 was calculated at 870 million euros.
One in every of the sources explained that essentially the most relevant point was the establishment of a link between free access and data transfer as a taxable transaction, which could have repercussions for other multinationals and other countries in Europe.
A 3rd source told Reuters that Meta believes there is no such thing as a direct connection between the info provided by users and the access given to the platform, and without this link, there can be no VAT due.
The assessment by the Italian authorities has been delivered to Meta’s attention and a dialogue was underway between the corporate and the revenue agency, in accordance with the sources.
The corporate may resolve either to simply accept the outcomes of the investigation and pay the requested amount, or contest it and open an administrative dispute.
In recent times, the Milan Prosecutor’s Office has opened several tax investigations against multinational tech firms equivalent to Google and Apple.
Normally, once an agreement for payment has been reached, the criminal investigation is closed.