Al Jazeera reports that they're describing it as "illegal state aid to the church".
The Commission is asking the Italian Government to explain the tax breaks the Vatican enjoys on income from property.
The London Times says the Vatican has agreed to co-operate fully with the EU. However many analysts say that the Holy See senses an underlying prejudice against the Church.
It insists that the profit it generates is used to help the poorest and weakest in society.
The paper also quotes the Rome correspondent for the Catholic Herald, who says the EU has a history of being anti-Catholic and anti-church.
The tax man cometh (Aljazeera, 4/9/07)
Vatican faces EU inquisition on tax (Times Online, 4/9/07)
LINKS (not necessarily endorsed by Church Resources)
Vatican City State
Vatican City (Wikipedia)