MILAN (Reuters) - Italian prosecutors are investigating e-commerce giant Amazon ( AMZN ) and three of its executives over alleged tax evasion worth 1.2-billion-euro ($1.26 billion), two sources with direct knowledge of the matter said on Friday.

News of the investigation broke last year, but the details over its extent only emerged on Friday. Italian daily Corriere della Sera was the first to report on them.

Amazon ( AMZN ) did not immediately respond to a request for comment and did not comment when the investigation was first reported.

Milan prosecutors and tax police placed the three managers and Amazon's ( AMZN ) Luxembourg-based European unit under investigation for tax fraud in online sales in Italy during 2019-2021, the sources said on Friday.

They said the bill for Amazon ( AMZN ) could rise to 3 billion euros, taking into account penalties and interest.

According to the sources, Amazon's ( AMZN ) algorithm allows it to sell in Italy goods from non-EU sellers, mostly Chinese, without disclosing their identity, helping them avoid paying Italian valued-added tax (VAT).

Under Italian law, an intermediary offering goods for sale in Italy is co-responsible for the non-payment of VAT by non-EU sellers that use its e-commerce platform.

The investigation, which started in 2021, resulted from routine checks carried out by tax police in an area north of Milan, the two sources said. They could not be named because they were not authorised to speak publicly on the issue.

In a separate investigation, Italian tax police in July 2024 seized approximately 121 million euros from an Italian unit of Amazon ( AMZN ) as part of an investigation into alleged tax fraud and illegal labour practices that is ongoing.

($1 = 0.9555 euros)