Italy’s financial police on Monday seized more than $835 million from accommodation-sharing service Airbnb for alleged tax evasion, according to a report from Reuters.
It is the latest sign of the increasing scrutiny of short-term rentals like Airbnb in Europe and the United States.
A judge in Milan authorized the seizure after the company failed to comply with laws requiring Airbnb to pay Italian tax authorities 21% of landlords’ rental income in the country. The seizure order covers the period from 2017 to 2021.
Airbnb spokesperson Christopher Nutly said that the firm had been working to resolve the matter with the tax authorities since June.
“We are surprised and disappointed at the action announced by the Italian public prosecutor on Monday,” said Christopher Nulty. “We are confident that we have acted in full compliance with the law and intend to exercise our rights with respect to this issue.”
As a part of the tax probe, prosecutors in Milan are also investigating three people who held managerial roles at Airbnb from 2017 to 2021.
Under a 2017 law, landlords in Italy must forward information from their rental contracts to tax authorities and withhold 21% from the rental income, and pay it to tax authorities.
Airbnb unsuccessfully challenged the law in 2022 arguing that Italy’s tax requirements for short-term rental providers violate the European Union’s principle of freedom to provide services across the 27-country bloc.
The Court of Justice of the European Union (CJEU) later ruled that member states were free to collect income taxes from short-term rental platforms.
“EU law does not preclude the requirement to collect information or to withhold tax under a national tax regime,” the court said in a statement.
The law also provides that non-resident persons who do not have a permanent establishment in Italy are obliged to appoint, in their capacity as persons liable to pay the tax, a tax representative.
In its ruling, the top EU court disagreed with this obligation.
“However, the obligation to appoint a tax representative constitutes a disproportionate restriction on the freedom to provide services”, the court added.
Airbnb continues to contest the law calling it “inherently complex and uncertain” while maintaining that it is not subject to it.
Italy declares war on tax dodgers
The move to seize Airbnb funds is the latest in a series of efforts by Italian and European authorities to crack down on the tax practices of global companies.
In 2019, Italian prosecutors probed Netflix Inc. after the US streaming company failed to file a return. Netflix later agreed to pay more than $59 million to settle the tax dispute related to penalties and interest from October 2015 through 2019.
Earlier this year, Milan prosecutors started investigating Facebook owner Meta Platforms in a similar tax probe that can turn up a $925 million tax bill.
The latest move to go after Airbnb for alleged tax evasion had been expected. Towards the end of last month, Italy announced a crackdown on landlords who did not pay taxes on short-term rentals through platforms like Airbnb.
The co-ruling Forza Italia party said the country would move to introduce a national identification code for short-term rentals, a move that could boost revenues by 1 billion Euros.
“That code will bring out the revenue of those who rent flats without declaring them. This will lead to more money in the state coffers which will go to reduce the tax burden,” Deputy Prime Minister and Forza Italia leader Antonio Tajani told reporters.
Italy is not the only country to clamp down on Airbnb. Countries like Malaysia, Austria, and the US have all put restrictions on similar businesses in recent months.
The platform, which enables people to rent out their homes or spare rooms to tourists, has been accused of inflating house prices, pushing out locals, and fueling overtourism.
