Amazon Investigated for €1.2 Billion VAT Evasion in Italy – Potential €3B Penalty

Officers from the prosecutor's office in Milano are investigating Amazon's potential VAT evasion. The prosecutors are investigating whether Amazon should have paid a large sum in VAT on behalf of its third-party sellers. The investigation covers three years, during which Amazon is suspected of not paying VAT on the billion-dollar amount.

Facts from the Investigation

Amazon has been investigated for not paying VAT of EUR 1.2 billion, which could go up to EUR 3 billion with potential penalties and interest. The Milan prosecutor's office reviews relevant documents to determine if the tech giant avoided paying due VAT between 2019 and 2021.

This investigation is based on the accusation that Amazon did not report VAT owed by non-EU, primarily Chinese, third-party sellers who sold their goods to Italian consumers. Since the Italian government amended VAT rules and regulations in 2019, the responsibility to charge, collect, and remit VAT for those transactions has remained with Amazon, not third-party sellers, as before the amendments were adopted and implemented.

The information about the investigation was released last spring, but these are the first known results. As one of the top 50 tax contributors to the  Italian budget, Amazon and its three investigated managers face one of the biggest challenges to its business model in Italy and the EU. If the VAT evasion allegations are confirmed, Amazon must pay one of the largest amounts owed.

However, the outcome of this investigation might also affect other global e-commerce companies, which is why this case is attracting considerable attention, especially given the potential US tariffs on the EU.

Conclusion

If the claims that Amazon did not comply with the Italian deemed supplier rules introduced before similar regulations were implemented on the EU level are valid, this could impact the whole EU e-commerce sector. 

Apart from the financial impact on Amazon, this could further reshape how Tax Authorities investigate and treat the largest e-commerce companies and set a precedent for future potential VAT and tax disputes. Moreover, as additional consequences of the investigation and its outcome, this could further disturb the US-EU economic relationship.

Source: Reuters, Financial Times