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EU reviews Italy’s Facebook VAT assessment for ‘free’ platform

EU’s Commission evaluates Italy’s €870m VAT assessment on Meta/Facebook for ‘free’ platform in exchange for users’ personal data

The European Commission’s VAT Committee is evaluating the VAT liabilities of Meta (Facebook) raised by the Italian authorities on the free provision of the Facebook social media platform to users in exchange for their personal data. Italy considers this a barter arrangement, and therefore subject to VAT. Italy’s tax agency requested the review by the EC given the novel technical and legislative issues.

The VAT Committee, an independent group of external indirect tax experts, will review the case. Any decision will be non-binding. There are several European Court of Justice cases which set the tests for a taxable supply in barter exchanges, and these indicate the Meta case does not meet them.

The Meta case raises complex questions on the link between VAT consideration and supplies. If there can be no demonstrable link or it is not possible for monetary value to be determined, then VAT is unlikely to be due. From the users’ perspective, they could view their data would cover the entire consideration of the use of the platform – the price and VAT due. Any liability to remit to the tax authorities the VAT amount would fall to Meta – hence this assessment.

There may also be the question of where is the consumption of user data taking place – and so does Italy have the right to tax? The place of supply is generally where the consumption takes place – so where does Meta actually use the user data?

Consideration need not be monetary for VAT purposes – no EU VAT Directive clarity

Typically, a VAT consideration for goods or services is monetary. But it may be non-monetary, for example as a barter. There is no legal definition of consideration in the EU VAT Directive. Aside from direct payments, it can be expenses (packing, transport, insurance etc). But there should be a link between the supply and the consideration because the supplier expects something in return for the supply

There are several important ECJ cases on this direct link question. One key point is the consideration must be capable of being expressed in money.

  1. Staatssecretaries van Financien v Cooperatieve Aardapplenbewarr-plaats ((1981) ECR 445. In this case, a trade association provided free cold storage facilities to its members who paid an annual membership fee. The court found no direct link between the storage facilities and economic costs for the association, so no VAT due.
  2. Apple & Pear Development Council (APDC), (ECJ (1988) STC 221; (1988)2 CMLR 394). Members of a fruit association paid annual fees for various promotion activities. The ECJ found not direct VAT consideration link and raised following points:
    • There was no relationship between the level of benefits which individual members obtained from the activities and the amount of the levy;
    • The benefits of the services accrue to the whole industry, so all members of sector benefited, not just the members;
    • The charges were always recoverable from each grower as a debt due to to the association regardless of whether or not a given service conferred a benefit to them. So meaning there was no real link between the payment and the activities.

Feb 2023: Reports of Italy’s Guardia di Finanza assessing €870 million VAT on users’ data offered to Meta (Facebook owner) as consideration for ‘free’ access to Facebook portal.

Italian authorities are reported to have raised a €870 million VAT assessment on Meta Platforms for 2015 to 2021 ‘barter’ arrangement between it and its users. The investigation was opened by Milan magistrates at the request of the European Public Prosecutor’s Office (EPPO). The assessment is based on users’ data captured by Facebook as being a taxable consideration for the access to social platform. Users do not have to pay for the use of Facebook platform.



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