Title: Airbnb Agrees to Pay $621 Million to Settle Tax Dispute with Italy
Airbnb announced last month that it might owe up to €840 million ($940 million USD) in back taxes on short-term rentals it didn't collect between 2017 and 2021 on behalf of hosts using their platform. Italian tax authorities threatened to seize these unpaid tax funds. Airbnb, in a statement, vowed not to recover any money from guests. Instead, the company is working on introducing new tools for hosts that will allow Airbnb to automatically withhold taxes and pay them directly to the Italian tax authorities.
"The vast majority of Airbnb hosts in Italy are regular families using the platform to earn supplemental income," Airbnb said. "We hope this agreement with the Italian tax authorities and recent legislative changes in Italy will provide these families with necessary information about the future rules of short-term rentals."
Italy is a crucial market for Airbnb, with thousands of hosts utilizing the platform to offer rentals. The typical host made roughly €3,500 ($3,800 USD) last year, according to Airbnb.
Italian tax authorities reported that Airbnb earned approximately €3.7 billion ($4.1 billion USD) in rental income in Italy from 2017 to 2021, with 21% being taxable.
Airbnb argued before the European Court of Justice that the 2017 short-term rental tax introduced in violation of EU regulations. Regrettably, Airbnb lost this case in December 2022.
In the past, Italy has successfully demanded taxes from other American tech giants. Google (GOOGL) agreed to pay Italy €306 million ($340 million USD) in 2017 to cover unpaid taxes from 2009 to 2015. Apple (AAPL) also paid a similar sum in 2015 to settle Italian tax debts.
The agreement with Airbnb comes in response to the Italian government's efforts to combat rampant tax evasion and raise the tax rate for short-term rentals offered by Airbnb from the current 22% rate.
Airbnb welcomed the Italian government's 2024 budget bill, which clarifies how the platform should handle income tax for non-professional Italian hosts and outlines the progress of national regulations for short-term rentals in Italy, including the national registration system.
"These improvements will aid historical centers like Venice and Florence to understand who is frequently hosting and, in response, develop appropriate political solutions. Airbnb is committed to collaborating with Italian authorities to ensure the success of these rules."
Additional Insights
Airbnb does not provide dedicated tax automation and compliance tools for Italian hosts. However, the company does facilitate collective tax collection and remittance for certain jurisdictions, as outlined in their Terms of Service[1]. Here's how it generally works:
- Tax Collection and Remittance: In jurisdictions where Airbnb handles tax collection and/or remittance, hosts instruct and authorize Airbnb to collect taxes on behalf of them. Airbnb then pays these taxes directly to the relevant tax authorities[1].
- Tax Reporting: Airbnb issues invoices or similar documents to support proper tax reporting. This helps hosts comply with local tax regulations by providing necessary documentation[1].
- Host Responsibilities: While Airbnb aids with certain aspects of tax collection and remittance, hosts still have obligations under applicable laws, like reporting, collecting, and remitting relevant VAT or other taxes[1].
For specific Italian compliance, hosts need to be aware of local rules, such as digitally signing and submitting invoices to the Italian tax authorities (Agenzia delle Entrate) and complying with e-invoicing and reporting requirements[2]. Airbnb does not offer dedicated tools for automating these specific Italian tax compliance requirements. Hosts might need to utilize third-party services or consult tax professionals for complete compliance with Italian tax regulations.
