The European Commission is reviewing an Italian tax claim against Meta Platforms Inc., the parent company of Facebook, Instagram, WhatsApp, and Oculus, according to three individuals familiar with the situation. This move places the tech giant's tax practices under scrutiny and sets a potential precedent for the taxation of digital services across the European Union.

The Italian authorities initiated an investigation into Meta following a tax audit by Italy's Guardia di Finanza (GdF) police. Based on this audit, Meta could face a tax liability of approximately 870 million euros in Italy. While this amount is relatively small for Meta, which reported over $32 billion in revenue last year, the implications of the case are significant.

The crux of the matter lies in Italy's contention that Meta's provision of online services could be considered a taxable transaction. Specifically, the Italian authorities argue that by offering users access to its platforms in exchange for personal data, Meta engages in a non-monetary exchange subject to value-added tax (VAT).

Meta has consistently refuted this interpretation, asserting that the provision of online platforms to users should not be subject to VAT. In light of the contentious nature of the issue, Italy's tax agency sought a technical assessment from the European Commission's VAT committee through the country's Department of Finance in September.

The European Commission's VAT committee will provide a non-binding evaluation on the matter. While the timeline for this assessment remains uncertain, a negative verdict could compel the Italian authorities to reconsider their stance on Meta's tax obligations. Moreover, any determination regarding VAT applicability in Italy would have implications for other EU member states, given the harmonised nature of VAT regulations within the bloc.

A spokesperson for the European Commission declined to comment specifically on the ongoing evaluation, emphasising that the VAT committee operates independently and addresses issues raised by member states as part of its regular agenda. Similarly, both Meta and the Italian tax agency refrained from offering immediate comments on the matter.

(With Reuters inputs)