MILAN, Dec 9 (Reuters) - Italian prosecutors have

wrapped up a probe into alleged tax evasion of 887.6 million

euros ($937.93 million) by Facebook parent company Meta

involving two executives of its Irish unit, the Milan

prosecutor's office said on Monday.

Closing the investigation is the formal step before

prosecutors file any requests for trial, unless the suspects

have first proven their innocence.

While it is a modest sum for a company that brought in more

than $32 billion in revenue last year, the case could have much

wider ramifications for the industry as it hinges on the way

Meta provides access to services such as Facebook and Instagram.

Meta has said that it takes its tax obligations seriously,

has paid all tax required in the countries where it operates and

would fully cooperate with the Italian authorities.

ONGOING NEGOTIATIONS BETWEEN META AND TAX AGENCY

The Milan prosecutor's office had been carrying out a

criminal investigation into the two managers of the

Irish-registered company Meta Platforms Ireland Ltd, a

subsidiary of the U.S. group.

But the key issue that could affect the wider industry is

being played out between Meta and Italy's Revenue Agency, and it

is still far from over.

Last year Italian tax police claimed that Meta user

registrations could be seen as a taxable transaction as they

implied the non-monetary exchange of a membership account in

return for the user's personal data.

In mid-November Italy's Revenue Agency sent Meta a so-called

"deed outline" (or "schema d'atto" in Italian), a list of its

own observations, fully endorsing the conclusions of a Guardia

di Finanza police investigation, two sources with knowledge of

the matter told Reuters on Monday.

On this basis the Milan prosecutors and tax police allege

that Meta would have failed to declare a taxable income of

almost 4 billion euros from 2015 to 2021, corresponding to VAT

evasion of more than 887 million euros.

The sources said Meta has 60 days to respond to the tax

authority's observations, after which it will either accept this

approach and pay an agreed amount or initiate a full-fledged

judicial tax dispute.

"We strongly disagree with the idea that providing access to

online platforms to users should be charged with VAT," a Meta

spokesperson said on Monday.

Due to the sensitivity and unprecedented nature of the

dispute, the Italian Revenue Agency, via the country's Ministry

of Finance, sent a request for a technical evaluation to the

European Commission's VAT Committee last December.

The requested opinion concerned the VAT treatment of online

services provided by the social network in return for the

provision of its users' personal data.

According to the two sources, the agency has yet to receive

a response from the Commission's committee.

($1 = 0.9463 euros)