Italy Concludes Probe into Meta Executives for Alleged €887.6 Million VAT Evasion

Italian prosecutors have concluded their investigation into alleged tax evasion by Meta (META.O), the parent company of Facebook, involving two executives from its Irish subsidiary, Meta Platforms Ireland Ltd. The probe centers on a claimed €887.6 million ($937.93 million) in VAT evasion. This marks a significant step in the process, although no trial requests have been made yet, as the suspects are still allowed to prove their innocence.

Implications for the Industry

The case could have broader consequences for the tech industry, as it involves how Meta provides access to its platforms like Facebook and Instagram. While the €887.6 million might seem modest compared to Meta’s $32 billion in annual revenue, the issue revolves around the way user data is exchanged for free access to these services, which could set a precedent for how other tech companies are taxed.

Tax Dispute with Italy’s Revenue Agency

The core of the investigation is tied to ongoing negotiations between Meta and Italy’s Revenue Agency. Last year, Italian tax authorities argued that Meta’s user registrations should be considered taxable transactions, as they involve the non-monetary exchange of personal data for access to social media services. The authorities claim that between 2015 and 2021, Meta failed to declare nearly €4 billion in taxable income, leading to VAT evasion of more than €887 million.

Next Steps and Meta’s Response

Meta has 60 days to respond to the Revenue Agency’s observations, after which the company can either settle by paying the proposed amount or initiate a legal challenge. Meta disagrees with the tax authority’s stance, arguing that providing users with access to its platforms should not be subject to VAT. In response to the dispute’s complexity, Italy’s Ministry of Finance has sought a technical opinion from the European Commission’s VAT Committee, though no response has been received yet.