Airbnb Requested to Provide Tax Information

Airbnb has recently found itself at loggerheads with authorities in several European Union countries. They argue that taxation and other requirements contradict the EU principle of the freedom to provide services across the 27-country bloc.

The latest case involves a 2017 Italian law requiring Airbnb and other short-term rental sites to forward information from their rental contracts, withhold 21% of the rental income, and pay it to tax authorities.

The company challenged the law in an Italian court. It subsequently sought guidance from the Luxembourg-based European Court of Justice (ECJ.

ECJ Advocate General Maciej Szpunar, whose opinion is non-binding, but the ECJ usually follows four out of five such recommendations, backed the Italian law.

He said that Article 56 TFEU (Treaty on the Functioning of the European Union) about the freedom to provide services does not preclude the obligation to collect and transmit information or to withhold tax.

It is perfectly consistent with imposing the obligation to withhold tax on intermediaries involved in the payment of rent, given that the activity of a large number of natural persons who are not subject to the obligations incumbent on professionals is, by its nature, difficult to audit for tax purposes.

Agreement with Airbnb or Not?

However, the obligation to appoint a tax representative constitutes a disproportionate restriction on the freedom to provide services, Szpunar said.

The ECJ will rule on the case in the coming months. In April, the court rejected a similar challenge by Airbnb to Belgian regional legislation requiring it to provide information to tax authorities on tourist transactions.

The case is C-83/21 Airbnb Ireland and Airbnb Payments UK.