Amazon Faces Criminal Trial in Milan: €1.2 Billion VAT Fraud Case Moves Forward

A criminal trial looms for Amazon EU Srl and four of its managers after a Milan prosecutor formally rejected pursuing criminal charges in favor of a tax settlement, electing instead to pursue fraud charges separately. The Prosecutor's Office in Milan, led by magistrate Elio Ramondini, has requested that the case proceed to full trial on allegations of €1.2 billion in VAT evasion between 2019 and 2021. This marks an unusual legal maneuver: while Amazon reached an administrative settlement with Italy's Revenue Agency in late 2024, prosecutors are pursuing separate criminal charges, reflecting how Italian law distinguishes between administrative tax violations and deliberate fraud.

Key Takeaways:

• Criminal charges despite settlement: Milan prosecutors are pursuing criminal fraud charges separate from Amazon's €527 million administrative settlement with the Italy Revenue Agency in late 2024, breaking from standard practice where settlements typically conclude cases

• Algorithmic accountability at stake: The core accusation involves deliberate platform design that enabled non-EU sellers—primarily from China—to operate without registering for Italian VAT

• Preliminary hearing pending: Judge Tiziana Landoni must now schedule a hearing (udienza preliminare) to determine whether evidence justifies proceeding to trial or dismissal—a standard gate-keeping procedure in Italian criminal law

• Wider regulatory pattern: This marks one case among multiple active investigations into Amazon's Italian operations, with total exposure potentially exceeding €3 billion including interest and penalties

Why Prosecutors Rejected the Settlement

The decision to seek criminal prosecution despite Amazon's administrative settlement signals a fundamental shift in how Italian courts distinguish between tax compliance violations and deliberate tax fraud. Prosecutors argue that the late 2024 payment to the Revenue Agency addresses only the administrative dimension—essentially a financial reconciliation—while leaving the criminal questions unresolved.

Under Italian legal doctrine, fraud (frode) requires intent and systematic deception, whereas administrative tax violations can be corrected through payment and interest. The Milan prosecution contends Amazon's conduct crossed this threshold. Specifically, prosecutors allege the company structured its marketplace algorithm and operational model to be "indifferent to EU tax and customs obligations"—meaning the design was neither accidental nor incidental, but rather functionally optimized to obscure seller identities and minimize VAT collection.

The Italian Finance Police investigation, which underpins the prosecution, focused on how Amazon's systems allowed tens of thousands of Chinese vendors to sell goods directly to Italian consumers without proper VAT registration or collection. Rather than implementing automated verification mechanisms or mandatory tax identification at onboarding, investigators argue Amazon's platform operated with minimal friction for non-compliant sellers, effectively subsidizing their cost advantage through unpaid tax obligations.

This interpretation matters for Italian residents and businesses. If prosecutors succeed, the ruling would establish that merely paying back taxes after detection is insufficient when the underlying business model was deliberately structured to evade obligations. That precedent could reshape how other platforms—and their regulators—approach third-party seller compliance in Italy.

Amazon's Response and Competitive Concerns

Amazon rejected the accusations in a brief statement, insisting the criminal case is "groundless" and pledging "determined defense" in court proceedings. The company simultaneously broadened its argument beyond the specific charges, framing the prosecution as emblematic of Italy's "unpredictable regulatory environment" and claiming that "disproportionate sanctions and prolonged legal proceedings" erode the country's appeal as an investment destination.

This rhetorical strategy—shifting from legal defense to policy critique—reflects a broader corporate communication pattern. By publicizing concerns about Italy's business climate, Amazon implicitly warns policymakers that aggressive enforcement carries economic costs. The company emphasized its role as one of Italy's largest foreign investors, having deployed over €25 billion over 15 years and maintaining more than 19,000 employees domestically.

For context, that employment base ranks Amazon among Italy's top foreign employers. Sustained legal conflict with such a major economic actor does create genuine friction within government, particularly among regional authorities and business groups dependent on continued investment flows. However, federal prosecutors—who operate independently—appear unmoved by these economic considerations, suggesting they view the tax principle as superseding concerns about corporate relations.

The Algorithmic Liability Question

One aspect that distinguishes this case from routine tax disputes is its focus on platform architecture as a mechanism for non-compliance. Rather than prosecuting Amazon solely for its own tax calculations or transfer pricing, Milan prosecutors are examining whether the company's infrastructure and operational choices actively enabled third-party seller evasion.

This raises a novel accountability question: Should platforms bear criminal liability when their design facilitates user non-compliance, even if the platform itself isn't the primary tax evader? Under traditional tax law, liability attaches to the entity with tax obligations—in this case, the Chinese sellers themselves. Prosecutors, however, appear to be arguing for collective responsibility, suggesting Amazon, by knowingly maintaining systems inadequate for tax compliance enforcement, shares criminal culpability.

If this theory prevails in court, it could establish a dangerous (or protective, depending on perspective) precedent. Other Italian marketplaces—including domestically operated platforms—could face similar scrutiny. Smaller platforms might lack resources to implement the compliance infrastructure prosecutors now seem to demand, inadvertently creating regulatory barriers that advantage larger, better-capitalized operators like Amazon itself.

Multiple Concurrent Investigations

This criminal prosecution is only one thread in a broader legal tapestry. Simultaneously, Amazon faces:

Antitrust enforcement: The Italy Competition Authority (AGCM) originally fined Amazon over €1 billion in 2021 for allegedly linking seller benefits—Prime eligibility, promotional visibility—to use of Amazon's own logistics service. A regional court reduced this penalty to €752.4 million in September 2025, but both sides have signaled intent to appeal further. The Authority's rationale hinges on Amazon's abuse of market dominance to foreclose competitors from the Italian logistics and fulfillment market.

Consumer protection violations: In May 2024, AGCM imposed a €10 million fine for deceptive practices—specifically, pre-selecting "subscribe and save" purchases instead of one-time orders, thereby manipulating consumer choice architecture. Amazon has indicated it will contest this finding.

Hidden operational entity investigations: A separate Milan investigation probe, disclosed in early 2026, alleges Amazon maintained an undeclared "stable organization" (stabile organizzazione) in Italy from 2019 through 2024, enabling avoidance of corporate income tax (IRES), regional tax (IRAP), and additional VAT liability. This theory, if proven, could open new exposure layers distinct from the marketplace VAT case.

European-level scrutiny: The European Public Prosecutor's Office (EPPO) is conducting a parallel investigation for similar conduct during 2022–2024, covering potential violations of EU tax directives. An EPPO prosecution could carry both Italian and cross-border regulatory dimensions, complicating Amazon's defense strategy.

Cumulatively, these investigations expose Amazon to potential penalties, interest, and administrative costs exceeding €3 billion when including the criminal case exposure and compound interest calculations.

The Larger Architecture of Tech Tax Avoidance

Amazon's situation exemplifies how large U.S. technology firms leverage structural advantages within Europe's fragmented tax system. The company, like peers including Alphabet, Apple, Meta, and Microsoft, has historically employed several techniques:

Intellectual property routing: Amazon established holding entities in Luxembourg and other low-tax EU jurisdictions, consolidating rights to algorithms, proprietary systems, and trademarks. Operating subsidiaries—such as Amazon EU Srl in Italy—pay inflated licensing fees to these holdings, artificially depressing local taxable profits while shifting income to favorable jurisdictions where it either remains untaxed or receives preferential treatment.

Profit shifting through transfer pricing: Related-party agreements allow Amazon to characterize operational expenditures in high-tax countries as "royalties" or "management fees" paid to lower-tax sister companies. By manipulating internal pricing assumptions, the company reduces reported Italian earnings while inflating expenses, minimizing both corporate and value-added tax burdens.

Leveraging legacy ruling agreements: Historically, jurisdictions like Luxembourg negotiated secret "advance rulings" (the 2014 LuxLeaks scandal exposed many) permitting corporations to lock in favorable tax treatments years in advance. Though new OECD guidelines restrict this practice, legacy agreements provide ongoing advantages.

According to Fair Tax Foundation research, the six largest U.S. tech firms collectively evaded approximately $277.8 billion in global taxes over a decade through such mechanisms. Within Italy specifically, the top 25 web-based multinationals generated €9.3 billion in revenue during 2022 but remitted only €206 million in taxes—yielding an effective tax rate of 2.2%, far below statutory corporate rates of 24%.

Responses and Regulatory Countermeasures

The European Union and individual member states have pursued several countermeasures, though implementation remains incomplete and politically contested:

Global Minimum Tax (GMT): The OECD brokered agreement among 140+ countries to establish a 15% floor on corporate tax rates globally, intended to eliminate competitive tax-cutting races. However, the United States under Trump announced withdrawal from the commitment, and the G7 subsequently carved out exemptions for American multinationals, asserting they face alternative domestic impositions (GILTI, BEAT rules). This undermined the agreement's efficacy, particularly for Italy and other high-tax countries hoping to recoup revenue from tech giants.

Digital Services Tax (Web Tax): Italy and other EU states proposed national-level Digital Services Taxes targeting revenue from digital advertising, platform commissions, and data sales. Italy implemented such a tax, but implementation faces U.S. threats of retaliatory tariffs, creating diplomatic friction that constrains enforcement.

Country-by-Country Reporting: Mandatory public disclosure of revenue, profits, and taxes paid per jurisdiction has increased transparency, yet without concurrent enforcement mechanisms, it provides data without compliance incentive.

Common Consolidated Corporate Tax Base (CCCTB): The EU has proposed harmonizing corporate tax bases across member states to eliminate profit-shifting opportunities, but this requires unanimous approval and has faced resistance from lower-tax jurisdictions and from governments concerned about sovereignty.

What This Means for Italian Businesses and Consumers

The Amazon trial outcome will ripple across multiple constituencies. For third-party sellers operating on Italian marketplaces, a conviction would likely trigger stricter compliance mandates. Platforms would face pressure to implement mandatory seller tax registration, real-time VAT collection mechanisms, and identity verification before activation. This would increase friction and compliance costs, potentially deterring smaller non-EU vendors and moderating selection diversity for Italian shoppers.

Chinese sellers, who dominate low-cost product segments in Italian e-commerce, would face the most direct impact. Normalized VAT compliance would raise landed costs, potentially pricing some products out of market competitiveness. Conversely, Italian and EU-based sellers might benefit from a more level competitive playing field if foreign competitors could no longer undercut through VAT non-compliance.

Consumers may encounter modest price adjustments as previously VAT-noncompliant products normalize their tax posture. However, the effect likely proves marginal—studies suggest VAT evasion in cross-border commerce represents only 2–4% of typical product markups. More substantive impacts would emerge if platforms impose frictions (longer shipping delays due to compliance verification) that degrade user experience.

For Italian businesses competing with Amazon, the trial signals potential vulnerability for the company's operational model in Italy. Were prosecutors to secure conviction, enforcement pressure would mount on other platforms, creating regulatory compliance costs that smaller Italian competitors might navigate more efficiently than internationally structured multinationals, theoretically evening competitive conditions.

The Preliminary Hearing and Path Forward

Judge Landoni must now schedule a preliminary hearing (udienza preliminare) to evaluate whether evidence suffices for trial commencement or whether charges should be dismissed. This hearing functions as a substantive gate-keeping proceeding required under Italian criminal procedure, not a mere formality. The judge will assess whether prosecution evidence demonstrates a credible basis for believing fraud occurred—a lower evidentiary threshold than "beyond reasonable doubt," but still requiring prosecutors to present persuasive preliminary proof.

Amazon's defense will likely challenge both the factual premise (whether platform design was deliberately indifferent to VAT obligations versus simply inadequate) and the legal theory (whether platforms can bear criminal liability for third-party seller non-compliance). The company may argue that VAT collection responsibility attaches to sellers and the Revenue Agency, not platform operators, particularly given the decentralized nature of marketplace commerce.

However, prosecutors hold an evidentiary advantage: Finance Police access to Amazon's internal platform documentation, algorithm configuration details, and communications among executives discussing compliance trade-offs. If such documents reveal deliberate decisions to deprioritize seller tax verification, the legal theory gains credibility.

If the case proceeds to trial, it would rank among the most high-profile criminal prosecutions of a multinational technology firm in Italian history, potentially establishing precedent affecting how platforms globally manage third-party compliance obligations.

For residents tracking Italy's regulatory environment, this case signals an aggressive posture toward technology companies' tax practices—signaling that settlement payments alone no longer guarantee immunity from criminal investigation. That stance, if sustained through conviction, would reshape corporate calculations about enforcement risk in Italy and potentially inspire similar prosecutions in other EU jurisdictions.