Airbnb, the popular online vacation rental platform, has reached an agreement with Italian authorities to settle a long-standing tax dispute. The company has agreed to pay a substantial sum of €576 million, equivalent to $621 million, to resolve the matter.
Italian prosecutors had previously asserted that Airbnb owed as much as €779 million, or $840 million, in unpaid taxes related to short-term rentals made through the platform between 2017 and 2021. The threat of funds being seized loomed over the dispute.
In a significant move, Airbnb has stated that it will not seek reimbursement of any of the settlement money from its hosts. Instead, the company intends to develop new tools that will enable automatic withholding and direct payment of taxes to Italian authorities on behalf of hosts. This approach aims to streamline the tax process for hosts and ensure compliance.
Airbnb’s presence in Italy is substantial, with thousands of hosts utilizing the platform to rent their properties. Notably, 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 amount designated for taxes.
Airbnb had previously challenged the legality of Italy’s tax on short-term rentals in a European Union court, but the company lost the case in December of last year.
Italy has a history 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. In 2015, a similar tax settlement was reached with Apple, amounting to €318 million.
This settlement between Airbnb and Italy comes at a time when the Italian government, under Prime Minister Giorgia Meloni’s leadership, is intensifying efforts to combat tax evasion and raising the tax rate on short-term rentals, including those offered through Airbnb, to 26%.
Airbnb 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, including the development of a national registration system. The company has pledged to collaborate with Italian authorities to ensure the effective implementation of these rules.
This resolution marks a significant step in Airbnb’s efforts to address tax-related concerns and adhere to local regulations. It also reflects Italy’s determination to enforce tax compliance in the rapidly evolving sharing economy.
