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

By  |  July 21, 2025

US based tech heavyweights Meta, X (formerly Twitter), and LinkedIn have launched legal challenges against a sweeping tax claim by Italian authorities that could reshape the landscape of digital taxation across Europe, according to Reuters.

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    The companies have filed appeals with an Italian tax court in response to a combined claim of over €1 billion, making this the first time Italy has taken such a case to full trial rather than settling out of court. Meta faces the largest demand at €887.6 million, while X and LinkedIn are being asked to pay €12.5 million and €140 million respectively.

    Per Reuters, the dispute stems from Italy’s assertion that offering free access to platforms like Facebook, Instagram, X, and LinkedIn in exchange for users’ personal data constitutes a taxable transaction under value-added tax (VAT) law. The Italian Revenue Agency contends that these exchanges are akin to bartering, where user data acts as consideration for digital services.

    According to Reuters, sources familiar with the matter revealed that the issue extends beyond a simple tax bill. Italian authorities are seeking a precedent-setting decision on how access to social media services should be treated under VAT rules, a move that could influence digital tax frameworks throughout the 27-member European Union, where VAT is uniformly regulated.

    The tech firms’ appeals come after the deadline to respond to a tax assessment issued in March passed in mid-July. Meta, the parent of Facebook and Instagram, responded to Reuters saying it had “cooperated fully with the authorities on our obligations under EU and local law,” while maintaining that it “strongly disagrees with the idea that providing access to online platforms to users should be subject to VAT.” LinkedIn stated it had “nothing to share at this time,” and X declined to comment.

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    Experts cited by Reuters noted that the legal interpretation being pursued by Italy could extend far beyond social media platforms, potentially affecting businesses ranging from airlines to online publishers that rely on data collection via cookies in exchange for offering free content or services.

    As the tax dispute progresses, Italian officials are reportedly preparing to escalate the matter to the European Commission by requesting a non-binding advisory opinion from its VAT Committee. The Committee, which meets biannually, could provide guidance that shapes Italy’s next steps. A negative opinion might compel Italy to drop the case entirely, sources told Reuters.

    The Ministry of Economy and the Revenue Agency in Italy declined to comment on the developments.

    This case adds to the growing list of tensions between EU authorities and U.S. tech companies. On July 11, Reuters reported that Meta would not revise its controversial “pay-or-consent” approach, despite facing regulatory scrutiny within the EU. Separately, the Financial Times reported on July 17 that the European Commission had paused one of its investigations into platform X over digital transparency violations, in light of ongoing transatlantic trade negotiations.

    Source: Reuters