Italian tax authorities have demanded that Meta, X, and LinkedIn pay value-added tax (VAT) on their operations, marking the first attempt in the European Union to apply VAT laws to social media platforms offering free services in exchange for user data.
According to a Reuters report citing four sources, Italy is seeking €887.6 million ($961 million) from Meta, €12.5 million from X, and about €140 million from LinkedIn.
Tax authorities argue free services involve a barter exchange
Users who register on Facebook X and LinkedIn platforms participate in an exchange process according to the presented case argument. All taxable transactions under EU VAT rules must have goods or services alongside payment terms. Italian tax authorities define user data as non-monetary compensation, which leads to VAT applicability for such transactions. Investigations into Meta and X for potential tax violations had been previously reported. However, LinkedIn’s involvement has not been disclosed until now. The current tax claims focus on 2015 and 2016, as the deadlines for those years are approaching, though the full investigation spans different periods up to 2022.
Meta stated that it would cooperate with authorities and comply with EU and local tax laws but opposed the idea that access to digital platforms should be subject to VAT. LinkedIn declined to comment, while X and Elon Musk have not made any public statements.
Potential implications for other companies
Legal experts warn that if Italian tax authorities succeed, the decision could impact other businesses that collect user data across the EU. Companies in retail, aviation, and publishing industries that provide free services in exchange for data could face similar tax obligations.
The three social media platforms have 60 days to challenge the claims. They will receive an additional month to negotiate if they seek a settlement. Possible outcomes include a legal battle that could last years, a partial settlement, or a decision by the Italian Revenue Agency to withdraw the claims due to legal or political considerations.
Italy pauses starlink negotiations amid trade concerns
Italy has also suspended discussions with SpaceX over a potential Starlink deal. Defense Minister Guido Crosetto confirmed in an interview that negotiations have been put on hold due to growing concerns over geopolitical and security issues.
European officials worry that U.S. control over Starlink could influence Ukraine’s decisions, particularly regarding trade agreements. Musk has denied claims that Starlink could be disconnected from Ukraine, stating that the service will remain operational regardless of political disagreements.
Italy was open to working with Starlink earlier this year, but political tensions affected the talks. The government has indicated that discussions may resume once security concerns are addressed.