Google Reaches Tax Settlement in Italy -- Update

By Giovanni Legorano Features Dow Jones Newswires

Alphabet Inc.'s Google has agreed to pay around EUR306 million ($334 million) in back taxes in Italy to settle a dispute that has dragged on a year and a half between the tech giant and the Italian authorities.

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The settlement is the outcome of one of several probes across Europe into the tax practices of multinational corporations, including several of America's biggest tech firms.

The agreement signed on Thursday between Google and the authorities in Rome relates mainly to corporate taxes the Italians accused Google of having failed to pay over the course of 2009 and 2015. The Italian authorities alleged Google routed more than EUR1 billion in Italy-based revenue to its office in Ireland, in addition to an older tax dispute dating back to the period between 2002 and 2006.

Thursday's deal will pave the way for agreements that Google pays taxes on future income generated in Italy, according to the Italian tax authorities.

"Google and the Italian Revenue Agency have reached a settlement, resolving a tax inquiry for a period between 2002 and 2015 without litigation," a Google spokesman said in an emailed statement. "We remain committed to Italy," the spokesman said.

The spokesman said that of the EUR306 million in back taxes, EUR303 million was attributed to Google Italy, with the rest to Google Ireland.

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This is the second settlement between a U.S. tech giant and the Italian tax authorities. Apple Inc. agreed at the end of 2015 to pay about EUR318 million to end a dispute in which the company allegedly failed to pay almost EUR900 million in taxes between 2008 and 2013.

Italy's tax authorities have targeted Italian companies and multinationals, in particular those using holding companies based in lower-tax countries. The Italian efforts are part of the broader European push aimed at recouping tax revenue that multinational companies have allegedly avoided by using complex corporate structures to book revenue in lower-tax jurisdictions, such as Luxembourg and Ireland, that they have earned in high-tax countries such as Italy.

The Italian tax police have investigated Amazon.com and Facebook Inc. People familiar with the matter said the tax police told Amazon the authorities believes it has evaded around EUR130 million of taxes in Italy on sales done through the company's Italian website worth around EUR2.5 billion between 2011 and 2015.

The person familiar with the matter said the tax police's investigation into Facebook is continuing.

Amazon and Facebook didn't immediately reply to requests for comment.

The tax controversies center on how much business Google and other tech companies conduct in individual European countries.

Google argues that clients in countries such as Italy don't actually close any advertising deals with employees in these countries, but instead buy the spots from Google Ireland, the company's headquarters for Europe, the Middle East and Africa.

In a similar fashion, Amazon argues the revenue that tax police say it didn't book in Italy was generated in Luxembourg where it was declared.

Write to Giovanni Legorano at giovanni.legorano@wsj.com

(END) Dow Jones Newswires

May 04, 2017 10:14 ET (14:14 GMT)