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EU Court: Airbnb Can Be Withholding Agent

posted 11 months ago

On short-term real estate leases (less than 30 days), it is lawful both to collect information and to apply a withholding tax provided for by the National tax system: two activities which, according to the UE Court of Justice, judgment lodged on 22 December in Case C-83/21, Airbnb Ireland and Airbnb Payments UK, are not contrary to EU law.

An Italian law of 2017 (no. 50) establishes an optional tax regime on short-term rentals outside the commercial activity: the income deriving from these contracts is subject to a withholding tax of 21%, due to the tax administration, if the owners concerned have opted for this preferential rate, and the data relating to the leases must be transmitted to the tax administration.

When collecting the fees, the subjects who carry out real estate brokerage activities must make, as tax substitutes, the withholding tax on the amount of the fees and provide for the relative payment to the Treasury. Non-residents without a permanent establishment (“PE”) in Italy are obliged to appoint a tax representative.

The Court has examined the legality of the measures only from the point of view of the prohibition of restrictions on the freedom to provide services within the European Union.

First, it noted that the requirement to collect and communicate to the tax authorities data relating to leases concluded as a result of real estate brokerage concerns all third parties, regardless of whether they are natural or legal persons, whether or not they reside or are established in that territory and whether they intervene through digital tools or other contact methods.

Next, as regards the obligation to withhold tax at source, that is also binding both on providers of property brokerage services established in a Member State other than Italy and on undertakings which have an establishment there.

The Court therefore rules out the possibility that those charges prohibit, impede or render less attractive the exercise of the freedom to provide services.

On the other hand, on the point relating to the appointment of a tax representative in Italy, the Court highlights a disproportionate restriction on the freedom to provide services, prohibited by art. Article 56 of the Treaty, since it is imposed solely on certain providers of real estate brokerage services without a permanent establishment in Italy. However, both the application of the Municipal tourist tax, taken by Airbnb from the amount only after remitted to the landlord, and the application of the Dac7 (2021/514) remain unchanged.


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