Airbnb to pay €576m to tax authorities in Italy

Italy: Airbnb has agreed to pay €576 million [$621 million] to tax authorities in Italy, bringing a long-running dispute to an end.

The news comes just a month after a judge in Milan ordered the seizure of €779.5 million [$831.6 million] from Airbnb’s European headquarters in Ireland over a probe into alleged tax evasion. At the time, prosecutors alleged that the home-sharing firm had failed to collect a mandatory 21 per cent of landlords’ rental income [the income is said to have come in at around €3.7 billion] and pay it to the Italian tax authorities, as per a 2017 law in the country.

In addition, three unnamed people who served in managerial roles at Airbnb between 2017 and 2021, the period during which the violation is alleged to have place, were placed under investigation. That investigation remains ongoing.

On Wednesday, Airbnb settled the dispute with Agenzia delle Entrate [the Italian tax office] for a lower sum than it was previously ordered to pay.

Airbnb, which initially expressed its “surprise and disappointment” at the action announced by the Italian public prosecutor, revealed that the settlement covered host withholdings between 2017 and 2021, before adding that it was still in discussions with the agency over tax obligations for this year and last year.

Last year, Airbnb challenged the law that was introduced in 2017 and cited by prosecutors in the statement, which requires all short-term rental providers to withhold 21 per cent of landlords’ rental income and pay it to the national tax authorities. The firm argued that Italy’s requirements on taxation were in contravention of the European Union’s principle of freedom to provide services across the bloc of 27 countries, however, the Court of Justice of the European Union [CJEU] ruled in the Italian government’s favour last December.

An Airbnb statement included in a US Securities and Exchange Commission filing read: “This mutual agreement means we can focus on continuing our collaboration with Italian authorities on taxes, short-term rental rules, and sustainable tourism for the benefit of our community.”

The firm maintained that it would not seek to recover money from short-term rental hosts and that it was planning to bring in new tools through which Airbnb could withhold taxable income before paying it to the Italian authorities.

It added that it “welcomes the progress of national short-term rental rules in Italy”, ahead of the expected approval of an EU-wide data-sharing framework before the end of the year.

In recent years, the Italian government has sought to scrutinise the tax practices of global corporations operating in the country. Airbnb is not the only major company to be targeted, though, with, Netflix, Amazon and Meta also said to be the subjects of tax-related inquiries.

Prime Minister Giorgia Meloni, of the right-wing populist political party Fratelli d’Italia [Fdl – Brothers of Italy], is planning to intensify the crackdown on short-term rental property owners by raising taxes from 21 per cent to 26 per cent for those who own and rent out more than one property.

Meanwhile, the co-ruling Forza Italia party [centre-right liberal-conservative] will introduce a national identification code for short-term rentals next year to prevent tax evasion. Some politicians believe that such a move could add around €1 billion to Italy’s fiscal revenue overall.

Earlier this year, a bylaw was approved in the Tuscan city of Florence which bans new short-term rental properties in the historic city centre from listing on platforms such as Airbnb. The bylaw, which is not retroactive, is designed to encourage a reduction in short-term rentals, as well as to grant owners and landlords a three-year tax break from second home municipal taxes if they switch to longer-term residential rentals.

Similar laws have also been mooted in cities such as Milan, Bologna, Rome and Venice.

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