Google Settles €326M Tax Dispute in Italy While Amazon Faces €1.2B VAT Probe

Italian prosecutors are working hard to deal with tech giants that did not comply with their national VAT rules and regulations. While Amazon is still under investigation for EUR 1.2 Billion in VAT evasion from 2019 to 2021, Google decided to settle the tax dispute and pay the due amount for the period between 2015 and 2019. This is the second time Google has paid a similar amount for not complying with Italian tax legislation.

Matters of the Dispute and the Settlement

The Italian prosecutors claimed a EUR 1 billion payment from Google in unpaid taxes, penalties, and interest. As the Milano prosecutors' office stated, the US-based tech giant failed to file and pay taxes on revenue in Italy. 

However, Google decided to settle the claim without the litigation, and signed a settlement agreement for EUR 326 million. Conversely, the Milano prosecutors stated that they submitted a request to dismiss criminal proceedings they had previously initiated as an ex-officio.

In 2017, Google also signed a settlement agreement to settle a previous tax case, and paid EUR 306 million in due taxes, penalties, and interest, as it was determined that it had a permanent presence in Italy.

Conclusion

Considering all the disputes that the Italian prosecutors and Tax Revenue Agency started and settled with some of the largest tech companies, it is expected that similar cases should be expected in the future. Now that Italy has decided to remove the national Digital Services Tax (DST) threshold, it should not surprise that more digital companies will find it challenging to comply with Italian tax rules and regulations.

However, it remains to be seen how tech and digital companies will respond to this practice in Italy. Some potential consequences include the suspension of services or changes in the service provision terms and conditions, such as price increases.

Source: Reuters, France 24