American tech giants Meta, X, and LinkedIn have filed an appeal challenging a landmark value-added tax (VAT) demand by Italian authorities a case that could set a precedent for tax policy across the European Union, according to four sources familiar with the matter. This marks the first instance in which Italy has failed to reach a settlement in such cases, leading to a full scale judicial tax trial against the companies.
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According to the sources, the case escalated because it moved beyond negotiating a settlement amount and instead aimed to set a broader legal precedent regarding how social media platforms deliver their services. Italian tax authorities contend that free user sign-ups on platforms like X, LinkedIn, and Meta constitute taxable transactions, arguing that users effectively exchange their personal data for access to membership accounts.
The matter is particularly delicate amid broader trade tensions between the European Union and the administration of U.S. President Donald Trump. Italy is demanding €887.6 million ($1.03 billion) from Meta, €12.5 million from X, and approximately €140 million from LinkedIn. Meta parent company of Facebook and Instagram Elon Musk’s X, and Microsoft-owned LinkedIn submitted their appeals to a first-instance tax court shortly after mid July, following the expiration of the deadline to respond to a tax assessment notice issued by Italy’s Revenue Agency in March.
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.
In a statement to Reuters, Meta said that it had cooperated “fully with the authorities on our obligations under EU and local law”.
It added that the company “strongly disagrees with the idea that providing access to online platforms to users should be subject to VAT”.
LinkedIn said it had “nothing to share at this time”.
X did not respond to a request for comment from Reuters.
ROME SEEN SEEKING EU ADVISORY
It is uncertain whether a full trial of the matter, which involves three levels of judgement and takes an average of 10 years, will go ahead.
Following discussions with the three companies, Italy is preparing as a next step to seek an advisory opinion from the European Commission, the sources said.
The Italian Revenue Agency will have to prepare specific questions, which the Economy Ministry will then send to the EU Commission’s VAT Committee, which meets twice a year.
Rome aims to submit its questions for the meeting scheduled to be held by early November, in order to receive the EU’s comments in time for the following meeting in spring 2026.
Italy’s Economy Ministry and Revenue Agency declined to comment.
The EU Commission’s VAT Committee is an independent advisory group. While its assessment will be non-binding, a “No” could prompt Italy to halt the case and ultimately drop the criminal investigation by Italian prosecutors, according to the sources.
The dispute is one of several between Europeans and U.S. Big Tech.
On July 11 Reuters exclusively reported that Meta would not be tweaking its pay-or-consent model further despite the risk of EU fines.
According to a Financial Times report on July 17, the European Commission has stalled one of its investigations into Musk’s platform X for breaching its digital transparency rules while it seeks to conclude trade talks with the U.S.
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