In a noteworthy development, Airbnb, the renowned online vacation rental platform, has come to terms with Italian authorities to resolve a longstanding tax dispute. As part of the settlement, the company has committed to paying a substantial sum of €576 million, which translates to $621 million.
Previously, Italian prosecutors had asserted that Airbnb owed a staggering €779 million, or $840 million, in unpaid taxes stemming from short-term rentals made through the platform between 2017 and 2021. The looming possibility of funds being seized added tension to the dispute.
In an effort to streamline the tax process for hosts and promote compliance, Airbnb has taken an unconventional step by announcing that it will not seek reimbursement of any portion of the settlement money from its hosts. Instead, the company plans to develop innovative tools that facilitate the automatic withholding and direct payment of taxes to Italian authorities on behalf of hosts.
Italy has a significant Airbnb presence, with thousands of hosts utilizing the platform to rent their properties. Notably, the average host in Italy earned just over €3,500 last year. According to Italian prosecutors, Airbnb raked in approximately €3.7 billion, or $3.96 billion, in rental income in Italy from 2017 to 2021, with 21% of this income allocated for taxes.
Airbnb had previously contested the legality of Italy’s tax on short-term rentals in a European Union court but suffered a setback when it lost the case in December of last year.
Italy has a track record of successfully recovering taxes from prominent US tech platforms. In 2017, Google agreed to pay Italy €306 million to cover taxes for the years 2009 to 2015, and in 2015, Apple reached a similar tax settlement amounting to €318 million.
This resolution between Airbnb and Italy comes at a time when the Italian government, led by Prime Minister Giorgia Meloni, is intensifying its efforts to combat tax evasion. This includes raising the tax rate on short-term rentals, including those facilitated by Airbnb, to 26%.
Airbnb has expressed its gratitude for the clarity provided by Italy’s 2024 Budget Law concerning income tax withholding for non-professional hosts. The company also acknowledged the progress made in establishing national short-term rental regulations, including the development of a national registration system. Airbnb has committed to collaborating with Italian authorities to ensure the effective implementation of these rules.
This settlement marks a significant stride in Airbnb’s commitment to addressing tax-related concerns and adhering to local regulations. It also underscores Italy’s determination to enforce tax compliance within the ever-evolving sharing economy landscape.
