Italy is demanding Google pay over 200 million euros ($218 million) in back taxes following an inquiry into its tax arrangements by the financial police, a judicial source said Thursday.
The technology giant is accused of failing to declare 100 million euros in income and pay 200 million euros in royalty taxes, the source said.
Corporate income tax in Italy currently stands at 27.50 percent, putting the total amount due at 227.5 million euros.
"Google complies with the tax laws in every country where we operate. We continue to work with the relevant authorities," a spokesperson for the company in Milan said.
The claim comes against a backdrop of mounting controversy over the tax arrangements of multinational groups who use cross-border corporate structures to reduce their tax bills, sometimes with the help of potentially illegal 'sweetheart' deals.
Google Italia is part of the company's European operation which is headquartered in Ireland, a country with one of the lowest levels of corporation tax in the European Union.
Italy's move follows the striking of a controversial deal in Britain last week which saw the Internet mammoth agree to fork out over 172 million euros in back taxes -- an amount scoffed at by the opposition as an effective tax rate of three percent.
It also comes a day after over 30 OECD countries signed an agreement to share information about multinationals in a push to boost transparency following public anger over large corporations playing the system to lower their tax bills.
In December, Apple agreed to pay Italy 318 million euros to settle a tax dispute after the US tech giant was investigated for suspected fraud.