The European Commission guidance provides clarification on how social media platforms’ IT services, provided in exchange for user data, should be treated under EU VAT rules
The European Commission released EU VAT Committee Working Paper No. 1118 on 17 November 2025.
This European Commission working paper addresses a question from Italian authorities concerning the Value Added Tax (VAT) treatment of IT services provided by social media platforms in exchange for users’ personal data.
The EU VAT Committee, an advisory body with representatives from all member states, issues nonbinding guidance on VAT matters.
The issue addresses whether the supply of IT services is a taxable transaction when the consideration is the user’s data, particularly in light of evolving business models that suggest a direct link between the quality/quantity of personal data and the level of service received.
The working paper reviews previous VAT Committee guidelines, which generally concluded that free IT services are not taxable if offered under the same conditions to all users, making it difficult to establish a direct link to individual data.
The Italian position argues that when a user’s action to restrict data collection results in a corresponding reduction of platform services, a direct link is established, making the service taxable.
Ultimately, the Commission services identify three scenarios, including one involving paid subscriptions, suggesting that a direct link and thus a taxable supply are most easily argued when users manipulate settings to receive a reduced service.
