The Court of Justice of the European Union has upheld the Italian tax regime that forces some platforms dedicated to short-term rentals, such as Airbnb, to collaborate with the tax administration through a series of reports on rental contracts. The objective is that these companies act as intermediaries in the collection of the tax that implies 21% of the income that is part of these rentals.
According to the European court, this Italian system is in line with Community regulations on free provision of services within the EU. Although I also consider that the obligation to designate a fiscal representative for these accommodations, when the owner does not have a permanent residence within Italy, may be something disproportionate and excessive.
Legal problems since 2017
The resolution of this case responds to the appeal filed by Airbnb against a 2017 Italian law that creates a new tax regime for short-term real estate leases outside of business activity. This affects both the agreements directly closed with these tenants and those entered into through certain mediators such as the online platform.
In compliance with this rule, the income derived from these lease contracts is subject to a 21% tax withholding in those cases in which the owners opt for preferential type applications. Data relating to lease contracts must be transmitted to the tax administration.
When the people who carry out the activity of real estate intermediation collect the rents or play a role in their perception, they must practice said withholding on the importation of the rents and enter the Public Treasury.
The high European court concludes that the obligation to collect and communicate to the tax authorities these relative data is not contrary to the common rule of freedom to provide services since it is imposed on all third parties operating on Italian territory. It also excludes that the withholding tax obligation hinders the exercise of the freedom to provide services since it is imposed both on intermediaries within Italy and on those established in other Member States.