Airbnb’s tax problems. The Italian resolution
According to the agreement between Airbnb and the Agenzia delle Entrate (Italian fiscal bureau), Airbnb must pay € 576 milion ($ 621 million) to the Italian tax authorities .
The amount was calculated on the estimate of the tax base where the company should have applied a 21% withholding tax during the period 2017-2021. Airbnb said they will not try to recover any withholding tax from hosts.
Summary:
2017: Italian law establishs that the web platform has the obligation to withhold a 21%
2017-2021: Airbnb didn’t act as a tax withholding agent and didn’t pay any tax
2022, December: the European Court of Justice said that Airbnb will must be a withholding agent
2023, November: the Italian Finance Police confiscated € 779 million.
2023, December: an Agreement was riched between Airbnb and the Italian Fiscal Bureau
What happened ?
Airbnb and its tax problems: the tax investigation
In November 2023 the Finance Police confiscated € 779 million ($ 840 million) from Airbnb after it allegedly failed to pay tax. Airbnb didn’t pay Italy the 21% withholding tax owed on about € 3.7 billion ($ 3.9 billion) of rental revenue, according to the statement.
The tax investigation started after a fiscal check on 3 May 2022 into the tax period 2017-2020 and extenting to 2021.
According to the Italian law of 2017 (art. 4 of DL 50/2017), Airbnb had an obligation to withhold a 21% (26% from 2024) from the proceeds of non-professional hosts. Airbnb then has to pay this sum to the Italian tax authorities.
According to the judge, handling the case, Airbnb refused to pay this obligation because it didn’t want to lose market share and so give competitors, who don’t use online payment, an advantage.
The hosts are concerned !
Airbnb and its tax problems could become problems for the hosts. Too if the judgement becomes a reality, many hosts were concerned. Indeed, Airbnb and the hosts would be jointly and severally obliged to pay tax. If Airbnb still doesn’t pay the tax, then the hosts have to pay it. During 2017-2021, they didn’t know about the Airbnb’s policy and therefore the lack of withholding was an unpleasant surprise.
The European Court of Justice sentence
At the same time, Airbnb contested the Italian decision before the European Court of Justice because Airbnb didn’t think it had to play the role of withholding agent. They considered that the Italian ruling was not lawful. On 22 December 2022 the European Court of Justice said that the Italian position was legitimate.
Airbnb as a withholding agent
Ultimately, Airbnb is a withholding agent according to the Italian 2017 law. The sentence of the European Court of Justice noted that in the 2024 budget the law establishes that all web platforms have to be withholding agents when the hosts are not professional.
The Hosts don’t have to pay any former withholding tax
Airbnb will pay the Italian tax authorities € 576 million and says it won’t try to recover the money from the hosts for the 2017 – 2021 period. Today, Airbnb and their tax problems are no longer problems for the hosts.
Airbnb and tax reporting framework
Furthermore, Airbnb says that it’s prepared to comply with DAC 7, an EU-wide tax reporting framework for digital platforms. These rules are designed to ensure that governments receive the taxes they are due, while supporting a more consistent, standardized and international approach to information sharing. Italian hosts are currently being notified about how the changes may impact their activity with Airbnb and will continue to request DAC 7 information from them before the data are shared with Irish Revenue Autorities in January 2024 (Airbnb is based in Ireland), and subsequently on to the Italian Revenue Agency.
Finally, Airbnb claims to be satisfied about the progress of national short-term rental rules in Italy, including the Italian national registration system and the EU wide data sharing framework.
