European Union law does not preclude the obligation to collect information or withhold tax in the case of short-term property rentals, the Court of Justice of the EU ruled on Thursday 22 December (Case C-83/21).
The Irish and British entities of the Airbnb group, which runs a property intermediation portal for short-term stays, are challenging the Italian law of June 2017, which sets the level of withholding tax to be levied on rental contracts concluded via the portal at 21% and requires the transmission of data on rental contracts to the tax authorities.
Referred to by the Italian Council of State, the Court examines the legality of the Italian law with regard to the prohibition of restrictions on the freedom to provide services in the EU.
Firstly, it notes that the obligation to collect and communicate to the Italian tax authorities data relating to rental contracts concerns all natural or legal persons, whether established in Italy or not. On the basis of its recent case law (Case C-674/20 - see EUROPE 12940/22), it considers that such an obligation does not run counter to the principle of freedom to provide services.
The European Court applies the same reasoning to the withholding tax obligation, which also applies to real estate intermediation service providers established throughout the EU.
Italian law also requires the appointment of a fiscal representative in Italy. This obligation, which entails procedures and costs related to the remuneration of the representative, is only imposed on providers not established in Italy. It therefore constitutes a restriction on the freedom to provide services prohibited in principle by the Treaty (Article 56 TFEU). And, according to the Court, it goes beyond what is necessary to achieve the objective of ensuring the efficiency of tax collection, in particular because it does not distinguish according to, for example, the volume of tax revenue collected.
Consequently, the obligation to appoint a fiscal representative is contrary to Article 56 TFEU, the Court ruled.
See the Court’s judgment: https://aeur.eu/f/4ry (Original version in French by Mathieu Bion)