U.S. Tech Giants File Appeal in Pivotal Italian Tax Case Amid Tense Trade Talks

Italy is seeking €887.6 million ($1.03 billion) from Meta, €12.5 million ($14.7 million) from X, and €140 million ($164 million) from LinkedIn.

According to Reuters’ sources, the escalation of the dispute is the result of the Italian tax authority seeking more than cash settlements in the discussions. It argues that free registration on the digital platforms should be treated as a taxable transaction because it involves an exchange of membership in return for a user’s personal data.

If the Italian government’s position is upheld it would represent a fundamental change in how digital platform providers are taxed. It could also reverberate within the EU’s harmonized VAT system.

According to European tax experts consulted by Reuters, its effect could also extend well beyond technology companies to any type of company that offers access to free services on its website in exchange for the user accepting profiling cookies.

Resolution of the case may be some time in coming, however. A court case could involve three levels of judgments including appeals, and could take several years to reach a final conclusion.

In the meantime, Italy is preparing to seek an advisory opinion from the European Commission. Per Reuters, the Italian Revenue Agency will need to submit specific questions to the Economy Ministry, which would then be referred to the EU Commission’s VAT Committee, which only meets twice a year.

The tax authority is hoping to submit its questions in time for the next meeting, scheduled for early November, in order to get a response by the following meeting in Spring 2026.

Related: US Tech Giants Challenge Italy’s Landmark VAT Demand in Court

The VAT Committee is an independent advisory group and its opinions are non-binding on the Commission. Should the committee reject Italy’s argument, however, the Revenue Agency could halt the case and drop the criminal investigation of the tech companies by Italian prosecutors.

The matter could also get entangled in trade talks between the EU and U.S. The U.S. has threatened to unilaterally impose a 30% tariff on all goods shipped from the EU if a deal is not reached by an arbitrary August 1 deadline. Although talks are ongoing, the EU has prepared a package of retaliatory tariffs on €93 billion ($109 billion) worth of U.S. goods and services.

EU technology regulations have been a particular irritant in trade relations under President Trump, who views them as unfairly burdening U.S companies. A number of the EU’s proposed retaliatory tariffs should a deal not be reached are targeted at U.S. services, including digital services like Meta, X, and LinkedIn, where the U.S. has a significant trade surplus with the EU.

As of press time, European Commission president Ursula von der Leyen was scheduled to meet with Trump in Scotland on Sunday, Politico Europe reported. EU diplomats briefed on the matter told Politico they are expecting a 15 percent U.S. baseline tariff deal before the Aug. 1 deadline.

“Everyone is quite tense,” said an EU diplomat.