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Italy has launched a groundbreaking tax case against major US tech companies, including Meta, X (formerly Twitter), and LinkedIn, over the way they handle user data.

The Italian tax authorities claim that when users sign up for these platforms, they are essentially engaging in a taxable exchange—providing personal data in return for access to services.

According to sources familiar with the matter, Italy has issued tax demands totaling €887.6 million ($961 million) to Meta, €12.5 million to X, and around €140 million to LinkedIn.

IrishExaminer reported that these claims cover various periods from 2015-2022, but the current tax assessment focuses on the earliest years, 2015 and 2016, before they expire under tax laws.

This case marks the first time a European country has officially classified the collection of user data as a taxable transaction under value-added tax (VAT) rules.

If successful, it could set a precedent across the European Union (EU), forcing other countries to reconsider how they regulate tech companies.

Italian tax authorities argue that social media companies operate on an exchange model—users provide personal data, and in return, they receive access to online platforms. Since data has financial value, authorities believe it should be taxed like any other transaction.

Meta has responded, stating that it strongly disagrees with this interpretation. "We have fully cooperated with authorities and remain compliant with EU and local laws," a company spokesperson said. "However, we do not believe that providing access to platforms should be subject to VAT."

LinkedIn has declined to comment, while X has not responded to requests for a statement.

Meta, X, and LinkedIn Have 60 Days to Appeal Italy's VAT Demands

If Italy's approach is upheld, the implications could extend beyond social media giants. Many businesses—including airlines, retailers, and news publishers—require users to accept cookies or share data in exchange for access to services.

This case could open the door for similar tax claims in other industries, potentially reshaping digital business models.

VAT is a harmonized tax across the EU, meaning other member states may follow Italy's lead. Experts warn that such a move could create new financial and legal challenges for tech companies operating across Europe.

The companies have 60 days to appeal the tax demands, with an additional month if they request a potential settlement, Reuters said.

If no agreement is reached, the case could go to court—a process that could take up to 10 years in Italy.

There are several possible outcomes:

Legal Battle: The companies may challenge the claims in court, creating a lengthy legal process with risks for both sides.

Settlement: The companies and Italian tax authorities could negotiate partial payments.
Case Withdrawal: The Italian government could decide to drop the case, either due to technical issues or political considerations.

Italy has aggressively pursued tech firms over tax issues in recent years. In February, Google agreed to pay €326 million to settle a separate tax dispute.

However, this is the first time Italy has taken the formal step of issuing a tax assessment before reaching a settlement.

Tags

Italy, Meta