The Investigation, Which Began In 2021, Focuses On Amazon’s Operations In Italy Between 2019 And 2021. Credit: Bluestork/shutterstock.

Prosecutors in Italy are probing e-commerce major Amazon and three of its executives for alleged tax evasion amounting to €1.2bn ($1.26bn), reported Reuters, citing two sources with direct knowledge of the matter.

This probe, which began in 2021, focuses on Amazon’s operations in the country between 2019 and 2021, with its Luxembourg-based European unit also under scrutiny.

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The investigation was first reported by Italian daily news outlet Corriere della Sera.

Sources report that the company’s algorithm enables it to sell products from non-EU sellers, primarily Chinese, in Italy without revealing their identity. This allows these sellers to evade paying Italian value-added tax (VAT).

In Italy, an intermediary who sells goods on behalf of non-EU sellers through its e-commerce platform is jointly responsible for any VAT non-payment.

Milan prosecutors and tax police are examining the alleged tax evasion, potentially resulting in Amazon facing a bill of up to €3bn, including penalties and interest.

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The investigation stems from routine checks by tax police near Milan, according to sources familiar with the matter.

Amazon, in an emailed statement to Reuters, declined to comment on the ongoing investigation.

The company said: “Amazon is committed to complying with all applicable tax laws”, highlighting its status as one of “Italy’s top 50 tax contributors”, with a tax bill exceeding $1.4bn in 2023.

The allegations, if proven in court, could potentially jeopardise Amazon’s business model throughout Europe, as VAT is a standardised tax across the continent, according to the two sources.

In a separate case, Italian tax police seized approximately €121m from an Italian unit of Amazon in July 2024, as part of an investigation into alleged tax fraud and illegal labour practices.

Milan prosecutors accused Amazon Italia Transport of evading labour and tax laws by using cooperatives or limited liability companies that supplied workers while omitting VAT duties. Amazon had then stated that it adhered to the necessary rules.

In May 2024, Amazon, along with Google and Airbnb, received backing from the European Union’s Court of Justice over a dispute regarding Italian regulations requiring tech companies to provide business information and financial contributions to the government.