Home » What exactly is Airbnb accused of and what consequences will there be on short-term rentals in Italy?

What exactly is Airbnb accused of and what consequences will there be on short-term rentals in Italy?

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What exactly is Airbnb accused of and what consequences will there be on short-term rentals in Italy?

A record preventive seizure: 779 million. Directly from the Airbnb coffers. The decision of the Court of Milan is unprecedented. At least towards a technological giant. The accusation against the Californian company is that it did not pay taxes on 3.7 billion euros collected in Italy between 2017 and 2021.

Money that the company collects from those who rent a room or apartment for short periods on the platform. And then the same company pays the tenants (Hosts) net of service commissions. A simple mechanism in itself, but which becomes complicated when it becomes the subject of taxes. Who has to pay rental taxes? Why did the judge order the seizure? And above all, what happens now to Airbnb and its Hosts?

The cause of the record seizure by the Financial Police

The decision of the judge for preliminary investigations, who ordered the Financial Police to proceed with the seizure of Airbnb Ireland, had been expected for a few weeks. Since last October 24th to be precise, when the Council of State issued a sentence after having implemented the indications of the European Court of Justice.

A rather clear ruling: Airbnb and other services that offer short-term rentals online must pay a flat rate tax on the rentals themselves, equal to 21%. And he must do it as a tax substitute/responsible. That is, the companies must retain this 21% upstream, giving the Hosts (those who rent houses on the platform) their compensation, net of the tax withheld and the costs of the service.

But Airbnb never wanted to consider itself a tax substitute/responsible. Invite your Hosts to pay taxes. But he never held back that 21% foreseen by the flat rate tax.

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Airbnb withholding tax and flat rate coupon at 21%

The flat tax is the tax regime on rental income. It was introduced in 2012 to simplify the calculation and collection of property tax, establishing a fixed percentage and replacing the Irpef calculations. Now, a 2017 law said that this dry tax for short-term rental contracts on platforms (such as Airbnb, Booking, etc.) must be paid by the platforms, not by the owners. Airbnb’s refusal to do so for all these years triggered the magistrate’s provision. And the Gdf seized 777 million from Airbnb. Which is exactly 21% of what the platform collected in Italy alone between 2017 and 2021, approximately 3.1 billion euros. This decision itself poses a first problem.

The Court ordered the seizure because the 2017 law is clear and does not leave room for too many interpretations: Airbnb and other platforms that work as real estate intermediaries must collect that 21%. The objective, we read in the text of the law, is also aimed at combating tax evasion. By collecting the tax upstream, i.e. from the platforms that rent the apartments, the taxman decided to avoid relying on the approximately 150 thousand Hosts (tenants of short-term rentals) present in Italy. Made largely of honest people who pay taxes, perhaps. But – according to the investigators – they often don’t do it. Or they declare less than they actually bill. Especially in the months where there is more demand.

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779 million: 21% of 3.7 billion, how much Airbnb collected in those years in Italy

The judge then ordered the seizure of the entire sum that Airbnb should have given to the treasury. Not taking into account any declarations or flat tax bills paid by individual tenants. But it is the law that says so. The tax must be paid by Airbnb. It is the platforms that have to retain that 21%.

Airbnb had the sums seized because it never wanted to consider itself a tax substitute/responsible. She challenged the law before the TAR and the challenge made its way to the decision of the Council of State, which essentially found her wrong.

In between, an important passage: the one where in 2022 the European Court of Justice issued a ruling that agreed with the Italian State, confirming Airbnb’s role as a tax withholding agent. The judge’s decision and the action of the Financial Police are a direct consequence of these steps. And it all leads to one conclusion: that is the norm, Airbnb can only adapt. Even if – this is the company’s thesis – it should not be able to do so because it is not a company with registered office in Italy.

In fact, it was Airbnb Ireland that the judges imposed the seizure on. And Airbnb Ireland has been in discussions with the Revenue Agency since June to resolve an issue. “We are surprised and saddened by the action announced by the Public Prosecutor on Monday. We are confident that we have acted in full compliance with the law and we intend to exercise our rights,” Airbnb’s head of Italy, Giacomo Trovato, told HuffPost.

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What happens now? The risks for Airbnb’s business in Italy and Europe

The story is not over. There may be new appeals. Attempts to resolve the case with a settlement. With an agreed sum. But the move by the Italian judges sets a precedent. Dangerous for Airbnb and perhaps for the entire short-term rental sector.

The widespread suspicion is that some ‘cousin’ countries of Italy, such as France, Spain and Portugal, may adopt similar measures. As is clear, the decision is a spanner in the works for Airbnb’s business model in Italy.

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But the future currently only poses questions. Airbnb could still appeal. Or decide to comply and retain 21%, which could result in lower revenue for Hosts and perhaps a higher price for users. Some scenarios – much less feasible – involve the company asking Hosts for part of that 21% that it did not retain in the years from 2017 to 2021. A very difficult road full of pitfalls.

The climate towards technological giants has changed. Airbnb in the crosshairs of tax authorities and municipalities

While every scenario remains open at a time when the general climate towards large platforms has changed. Airbnb is accused not only of tax evasion, but also of having triggered a dangerous mechanism to increase house prices in historic centres, in less central areas, of having clogged the cities with tourists without taking into account the real accommodation capacity of each individual common. Venice has already taken action, Florence did the same last June, the government itself announced restrictions and limitations on the platforms. It is the entire political framework that has changed. Bills and taxes aside, you have to deal with this too.

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Witness how the news was commented on. Airbnb has also become a topic of polarization on social media. The reactions to the fine range from the satisfaction of those who see the platform as a symbol of the most disastrous consequences of mass tourism to the tech community, which links the fine to all the actions taken by Italy to counter innovation, from the ChatGpt ban to the lighthouses on the anti-privacy activities of social media giants such as Meta. But even from a fiscal point of view the matter is not very clear.

Was seizing 779 million the best choice?

And perhaps it could have gone differently: “What happened represents, in my opinion, one of those cases which testifies to the need to reform the Taxpayer’s Statute in a more incisive way”, commented to our newspaper the tax lawyer Valerio Vertua, partner of 42LF.

“In the context of relationships of good faith and collaboration between the taxpayer and the tax authorities in a tax case which is not easy to interpret, already the subject, moreover, of a ruling by the European Court of Justice, a ruling by the TAR and then by the Council of State , the law could have provided for a power of assessment on a single year in such a way as to allow the taxpayer, if he had actually made a mistake, to be able to remedy it by resorting to institutions such as, for example, voluntary repentance”, he concludes. In short, the judges could also have taken it easier. However, the muscular action complies with the law. Ground for debate. Debate that will continue for years to come.


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