Airbnb, a global leader in short-term rentals, is grappling with a significant legal setback in Italy, where an Italian judge has issued a ruling to seize €779.5 million (equivalent to $835.5 million or £676.8 million) from the company due to allegations of tax evasion. Prosecutors contend that Airbnb failed to collect and remit a 21% tax on approximately €3.7 billion in rental income earned by landlords within the country.
Italian law mandates that landlords pay a 21% tax on their earnings from short-term rentals. Airbnb promptly expressed its surprise and disappointment over the decision, emphasising that its European headquarters have been actively engaged in resolving the matter with the Italian tax agency since June. Christopher Nutly, an Airbnb spokesperson, conveyed the company’s confidence that it has diligently adhered to legal requirements and intends to assert its rights in response to this ruling.
Further complicating the matter, three individuals who held managerial positions at Airbnb during the period from 2017 to 2021 are now under investigation, according to a statement released by Milan Tribunal prosecutors. This development underscores the depth of the legal challenges facing Airbnb in Italy.
In a broader context, Airbnb had contested an Italian law introduced in 2022 that necessitated the company, alongside other short-term rental providers, to withhold and remit 21% of the rental income collected from landlords to tax authorities. Airbnb had argued that this requirement contravened the fundamental European Union principle of the freedom to provide services across the EU’s 27 member nations. However, the highest court of the European Union ultimately upheld the tax withholding mandate, which required Airbnb to abide by these regulations.
In a proactive response to tax evasion concerns associated with short-term rentals through platforms such as Airbnb, Italian politicians announced a plan to introduce a national identification code specifically for short-term rentals. This proposed code aims to address the issue of unreported rental income by effectively tracking and ensuring the collection of taxes on these transactions. Politicians estimate that the implementation of this code has the potential to bolster Italy’s fiscal revenue by up to €1 billion, highlighting the country’s determination to enforce tax compliance within the short-term rental sector.