Short-term accommodation services company Airbnb must provide information on rental contracts to tax authorities and withhold taxes under a national regime, the European Union’s top court ruled on Thursday.
The ruling comes in response to an appeal by Airbnb against a 2017 Italian law that requires Airbnb and other short-term rental sites to submit information from their rental contracts to tax authorities and retain 21% of rental income and pay it to tax authorities.
The company challenged the law in an Italian court, arguing that taxation and other requirements contravene the EU’s principle of freedom to provide services across the 27-nation bloc.
Subsequently, the Italian court sought guidance from the Court of Justice of the European Union (CJEU).
“EU law does not preclude the obligation to collect information or to withhold taxes under a national tax regime,” the EU court said in a statement.
“However, the obligation to appoint a tax representative constitutes a disproportionate restriction on the freedom to provide services,” it added.
Italian hoteliers’ association Federalberghi welcomed the ruling, noting that it was the plaintiff in the case, and effectively accused Airbnb of shirking its tax obligations in Italy.
“Tax evasion and unfair competition harm both traditional tourism companies and those that correctly manage new forms of hospitality,” he said in a statement.
According to Federalberghi, Airbnb has stopped withholding and handing over about 1.5 billion euros ($1.6 billion) to the treasury over six years.
But an Airbnb spokesperson said the company was already supporting the correct payment of host income tax by implementing the common tax reporting framework agreed by the EU.
“Airbnb does not have a tax representative to enforce income tax withholding in Italy and the CJEU ruling makes it clear that any requirement to appoint one is contrary to EU law,” the spokesperson said.
“We will continue to advance the EU-wide approach to income tax returns while we await the final decision of the Italian court,” the Airbnb spokesperson said.
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