Short-term rental company Airbnb is required to provide information in rental contracts to the tax authorities, an adviser to the European Supreme Court said Thursday, citing another potential legal setback in Europe for the company.
Airbnb has been at odds with authorities in several European Union countries in recent years, arguing that taxes and other requirements violate the EU’s principle of the freedom to provide services in the 27-nation bloc.
The latest case concerns an Italian law from 2017 that requires Airbnb and other short-term rental sites to forward information from their rental contracts and withhold 21% of rental income and pay it to the tax authorities.
The company challenged the law in an Italian court, which then sought advice from the Luxembourg-based Court of Justice of the European Union (CJEU).
ECJ Attorney General Maciej Szpunar supported the Italian law. Its advice is non-binding, but the ECJ usually follows four out of five such recommendations.
“Article 56 TFEU (Treaty on the Functioning of the European Union) with regard to the freedom to provide services does not exclude the obligation to collect and pass on information or to withhold tax,” said Szpunar.
“It is perfectly consistent to impose the obligation to withhold taxes on intermediaries involved in the payment of rent, since the activity of a large number of natural persons who are not subject to the obligations of professionals is by their nature difficult to audit for tax purposes.”
In one respect, he agreed with Airbnb’s argument.
“However, the obligation to appoint a tax representative constitutes a disproportionate restriction on the freedom to provide services,” said Szpunar.
Airbnb said: “Airbnb wants to be a good partner in the tax field and we support a consistent, standardized approach to information sharing. That is why we welcome the EU Member States’ agreement on a common tax reporting framework for digital platforms, known as DAC 7 .”
The ECJ will rule on the case in the coming months. In April, the court rejected a similar appeal by Airbnb against Belgian regional law that requires it to provide information to the tax authorities on tourism transactions.
The case is C-83/21 Airbnb Ireland and Airbnb Payments UK.
© Thomson Reuters 2022