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Airbnb settles tax dispute with Italy and pays €576 million

Airbnb settles tax dispute with Italy and pays €576 million Photo: Airbnb settles tax dispute with Italy and pays €576 million (GettyImages)

Airbnb has settled a tax dispute with Italy by agreeing to pay €576 million ($621 million) to Italian authorities. According to Financial Times, this agreement resolves a conflict over the company's failure to withhold rental income taxes from hosts, as Italian law requires.

The settlement, reached with Italy's Agenzia delle Entrate (tax office), comes after Italian prosecutors accused Airbnb of not complying with a 2017 law obliging short-term rental platforms to collect 21% of landlords' rental income for tax authorities.

Airbnb announced that the settlement reached on Wednesday addresses host withholdings from 2017 to 2021 and mentioned that negotiations are ongoing regarding tax responsibilities for 2022 and 2023.

Recently, authorities initiated investigations into three individuals who occupied managerial positions at Airbnb from 2017 to 2021. These inquiries are still in progress, per an individual knowledgeable about the situation. Additionally, Airbnb stated that it would introduce new tools for hosts to facilitate automatic withholding of taxable income in compliance with Italian regulations.

The company is also preparing for new national short-term rental rules in Italy, including a national registration system and EU-wide data-sharing framework.

Airbnb is facing regulatory challenges, particularly following a surge in travel post-pandemic, which has resulted in an influx of tourists in various cities. For instance, New York, once a major market for Airbnb, implemented regulations in September restricting homeowners' ability to rent out rooms on the platform. This change led to the removal of approximately 75% of listings in the city.

Similarly, Florence has banned new Airbnb listings this year, and in Venice, the number of tourist accommodations now surpasses the total number of permanent residents. Starting next summer, Vienna plans to cap the duration homeowners can list their properties on Airbnb to 90 days.

Airbnb taxation

The background of this situation stems from Airbnb's rapid global expansion and the growing regulatory scrutiny it faces in various countries. Like many other countries, Italian authorities have been grappling with the implications of short-term rentals on housing markets and local tax revenues.

The 2017 law in Italy ensured fair taxation of income generated through platforms like Airbnb. In the proposed budget for 2024, the government of Italian Prime Minister Giorgia Meloni intends to raise the tax rate on extra rental properties to 26 percent.

Similarly, other global tech corporations, such as, Amazon, and Meta, have also reached tax agreements with Italian officials in the recent past.

The issue has become more pressing as cities struggle with housing shortages and the impact of tourism on local communities, leading to stricter regulations and enforcement actions against short-term rental platforms.