BRUSSELS (Reuters) -Short-term accommodation services company Airbnb must provide information in rental contracts to tax authorities and withhold tax under a national regime, the European Union's top court ruled on Thursday.
The ruling comes in response to a challenge from Airbnb to an Italian law from 2017 requiring Airbnb and other short-term rental sites to forward information from their rental contracts to tax authorities and to withhold 21% from the rental income and pay it to tax authorities.
The company challenged the law in an Italian court, arguing that taxation and other requirements contravene the EU principle of the freedom to provide services across the 27-country bloc.
The Italian court subsequently sought guidance from the Court of Justice of the European Union (CJEU).
"EU law does not preclude the requirement to collect information or to withhold tax under a national tax regime," the EU court said in a statement.
"However, the obligation to appoint a tax representative constitutes a disproportionate restriction on the freedom to provide services," it said.
Italy's hoteliers association Federalberghi welcomed the ruling, noting it was a plaintiff in the case, and effectively accused Airbnb of shirking its tax duties in Italy.
"Tax evasion and unfair competition damage both traditional tourist businesses and those who correctly manage the new forms of hospitality," it said in a statement.
According to Federalberghi, Airbnb has failed to withold and hand over to the inland revenue an estimated 1.5 billion euros ($1.6 billion) over the course of six years.
But an Airbnb spokesperson said the company was already supporting the correct payment of host income tax by implementing the EU's agreed common tax reporting framework.
"Airbnb does not have a tax representative to enforce the withholding of income tax in Italy, and the CJEU's ruling makes clear that any requirement to appoint one is contrary to EU law," the spokesperson said.
"We will continue to make progress on the EU's bloc-wide approach to income tax reporting while we await the final decision of the Italian court," the Airbnb spokesperson said.
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