Rosalind Evans
Airbnb, the widely-used online vacation rental platform, has reached a resolution with Italian authorities to settle an ongoing tax dispute. As part of the agreement, Airbnb will pay a substantial sum of €576 million, equivalent to $621 million, to put the matter to rest.
Previously, Italian prosecutors had asserted that Airbnb owed as much as €779 million, or $840 million, in unpaid taxes related to short-term rentals facilitated through the platform between 2017 and 2021. The looming threat of funds being seized had cast a shadow over the dispute.
In a notable move, Airbnb has committed to not seek reimbursement of any of the settlement amount from its hosts. Instead, the company has plans to develop new tools aimed at facilitating automatic withholding and direct tax payment to Italian authorities on behalf of its hosts. This innovative approach is designed to streamline the tax process for hosts and ensure their compliance.
Airbnb has established a significant presence in Italy, with thousands of hosts utilizing the platform to rent their properties. Remarkably, the average host in Italy earned slightly over €3,500 last year. According to Italian prosecutors, Airbnb generated approximately €3.7 billion, or $3.96 billion, in rental income in Italy from 2017 to 2021, with 21% of this income designated for taxes.
Previously, Airbnb had challenged the legality of Italy’s tax on short-term rentals in a European Union court. However, the company lost the case in December of last year.
Italy has a track record of successfully recovering taxes from major US tech platforms. In 2017, Google agreed to pay Italy €306 million to cover taxes for the years 2009 to 2015. Similarly, in 2015, Apple reached a tax settlement with Italy, amounting to €318 million.
This settlement between Airbnb and Italy is occurring at a time when the Italian government, led by Prime Minister Giorgia Meloni, is intensifying efforts to combat tax evasion. The government has also raised the tax rate on short-term rentals, including those offered through Airbnb, to 26%.
Airbnb has expressed its appreciation for the clarity provided by Italy’s 2024 Budget Law regarding income tax withholding for non-professional hosts and the progress of national short-term rental regulations. This includes the development of a national registration system. The company has pledged its cooperation with Italian authorities to ensure the effective implementation of these regulations.
This resolution signifies a significant step in Airbnb’s commitment to addressing tax-related concerns and complying with local regulations. It also reflects Italy’s determination to enforce tax compliance within the rapidly evolving sharing economy.
