Italy probing Amazon over 1.2b euros in third-party seller VAT

Amazon could end up on the hook for $3.1 billion – Copyright AFP Ishara S. KODIKARA

Italian prosecutors are examining whether online giant Amazon.com evaded 1.2 billion euros in value-added tax (VAT) it should have paid on behalf of certain third-party sellers, sources told AFP Monday.

The total claim against the online retailer, including penalties, could rise to as much as three billion euros ($3.14 billion), a source in Italy’s financial crimes police said.

The preliminary investigation, confirmed by a source within the Milan prosecutors’ office, involves a three-year period from 2019 to 2021. 

An Italian law in 2019 made e-commerce businesses responsible for the VAT owed by its third-party sellers outside the European Union selling goods to customers in Italy.

Previously, these third-party sellers were responsible for paying the tax.

The Italian law came ahead of a reform of EU e-commerce rules, which took effect in July 2021, that sought to simplify how online platforms collect VAT. 

A review of transactions from 2019 to 2021 by Italy’s financial crime police found “unpaid VAT” by Amazon amounting to 1.2 billion euros, a source at the force told AFP.

“If you add to this sum the penalties… you get up to three billion euros,” the source said. 

The police investigation, begun in the spring of 2024, wrapped up in December. 

Amazon said it would not comment on ongoing investigations, but said it was “committed to complying with all applicable tax laws”. 

The Seattle-based tech company added that it had paid direct and indirect taxes of 1.4 billion euros to Italy in 2023.

A preliminary investigation by prosecutors does not necessarily lead to charges. 

The Italian investigation comes as US President Donald Trump, who has railed against his country’s trade deficit with the EU, has threatened the bloc with reciprocal tariffs. 

He has said that VAT — which is not a tariff but a consumption tax irrespective of the origin of the good — could be subject to a reciprocal levy. 

The EU measure that made online platforms liable for the tax obligations of third-part sellers was designed to ensure fair competition for the bloc and recoup lost VAT. 

The reform also removed an exemption on collection of the tax on low-value goods.