Meta, X and LinkedIn lodge appeal against 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

US tech giants Meta, X and LinkedIn have lodged an appeal against an unprecedented VAT claim by Italy that could influence tax policy across the 27-nation European Union, four sources with direct knowledge of the matter said on Monday.

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 US 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 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.