Airbnb to pay €576mn settlement in end to tax dispute in Italy

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Airbnb has agreed to pay €576mn ($621mn) to Italian authorities to end a long-running tax dispute that boiled over last month when the country’s public prosecutor seized funds from the holiday rental platform.

The US short-term rental platform settled on Wednesday with Agenzia delle Entrate, the Italian tax office, for a lower sum than was ordered by authorities last month.

Italian prosecutors said Airbnb had failed to comply with a 2017 law obliging short-term rental platforms to collect 21 per cent of landlords’ rental income on behalf of tax authorities.

Airbnb said Wednesday’s settlement covered host withholdings between 2017 and 2021, adding that discussions were continuing over tax obligations for 2022 and 2023.

The dispute with Italy’s tax agency is the latest regulatory run-in for the San Francisco-based accommodation rental company. Authorities worldwide are increasingly targeting Airbnb as housing has become scarcer for local residents, rents have risen and cities have been overrun with tourists.

Italian citizens have grown frustrated by the use of housing in popular travel destinations for short-term tourist rentals, leaving university students, young families and workers unable to find places to live.

However, Airbnb said it hoped the settlement of the tax case would help reduce tensions with Rome.

“This mutual agreement means we can focus on continuing our collaboration with Italian authorities on taxes, short-term rental rules and sustainable tourism for the benefit of our community,” said Airbnb in a statement released alongside a Securities and Exchange Commission filing on Wednesday. The company said it was not seeking to recover money from hosts.

Last month, prosecutors also placed under investigation three individuals who had held managerial roles at Airbnb between 2017 and 2021. Those investigations are ongoing, according to a person familiar with the matter.

The company said it was preparing to introduce new tools for hosts that would allow Airbnb to automatically withhold their taxable income before paying it to Italian authorities.

From next year, the Italian government will introduce a national identification code on short-term rentals to crack down on landlords who do not pay taxes.

Airbnb added that it “welcomes the progress of national short-term rental rules in Italy, including the Italian national registration system and EU wide data sharing framework”.

Under 2024 budget plans, Italian Prime Minister Giorgia Meloni’s government plans to increase the tax owed on additional rental properties to 26 per cent.

Other multinational technology companies have also struck tax deals with Italian authorities in recent years, including Booking.com, Amazon and Meta.

Meanwhile, Airbnb continues to deal with pressure from regulators, especially after a post-pandemic travel boom that has led to cities being inundated with tourists.

In the most high-profile example, New York, previously one of Airbnb’s biggest markets, in September introduced rules limiting residents’ freedom to rent rooms in their homes on the platform, culling about three-quarters of listings in the city.

Florence this year banned new Airbnb listings while tourist beds in Venice exceed the total number of long-term residents. Vienna from summer next year plans to limit the amount of time homeowners can list their property on Airbnb to 90 days.