Italy – Tax Evasion: Amazon EU Potentially Faces Trial for Tax Evasion

Milan prosecutors proposed to the court that it initiate a trial against Amazon’s European division (Amazon S.a.r.l.) and four of its managers for tax evasion. The alleged tax evasion covers transactions finalized between 2019 and 2021. 

The prosecutors claim that Amazon S.a.r.l., operating as an e-commerce marketplace, helped (permitted) non-EU-based merchants avoid paying hundreds of millions of euros in taxes to the Italian Revenue Agency. Under EU VAT rules, the intermediary digital platform that facilitates the sale of goods originally sold by non-EU merchants is jointly and severally liable for tax on the underlying supplies. 

Prosecutors claim that the algorithm under which the EU Amazon division platform operates knowingly skipped duly (and by law-mandated) verification of the tax IDs of underlying suppliers. The “negligence” of due diligence of the underlying suppliers’ personal/company data led to tax avoidance. 

Impact

Under EU law, Amazon’s EU division bears joint and several responsibility for tax collection and reporting for non-EU-established underlying suppliers. Most of these suppliers (based in China) haven’t collected VAT on distant sales and haven’t registered for VAT at all. 

When this is the case, in most of the cases the Amazon SARL should act as a deemed supplier, acting as a tax agent on behalf of the underlying supplier. The Italian Tax law clearly states that, in these cases, Amazon should collect and remit the tax due if the original supplier hasn’t. 

How is this possible 

The prosecutors claim that this has been possible because the underlying suppliers who conducted sales without tax collection haven’t submitted their TAX IDs or other relevant information, so Amazon could have verified their tax status. 

Amazon requires this information on its EU and US marketplaces for merchants who wish to register an account. However, according to the prosecutors, the marketplace hasn’t conducted any ID verification for these transactions or merchants. 

Amazon vs Revenue Agency

Last December, Amazon reached an agreement with the Revenue Agency on this matter, settling the dispute and paying EUR 527 million plus interest, with which the agency closed the case. However, the criminal case proceedings, which have been going on in parallel for tax evasion, despite the settlement agreement, were moving forward. 

Amazon hasn’t commented on this decision. Italian media outlets report that Amazon’s behaviour led to hundreds of thousands of low-value imports from China, for which no tax was collected. 

These ongoing criminal proceedings may involve the participation of tax authorities or prosecutors from other EU Member States. 

In what way the case will move forward, we will soon know.