Dusseldorf The EU has identified a problem that costs member states billions a year: VAT evasion on short-term rentals. EU Economic Commissioner Paolo Gentiloni estimates the total revenue that the EU countries lost in 2020 due to unpaid sales tax at 93 billion euros.
The result: Brussels has been planning since December to oblige rental portals such as Airbnb, Booking or Fewo-direkt/Expedia to act as collection agencies. They should take the money directly from the tenants of the brokered apartments. So far, not the portals, but the apartment landlords as potential small entrepreneurs are responsible for this task.
But the Internet companies specializing in short-term rentals are vehemently opposed to the move – and possibly rightly so. Because according to the EU plan, they should also collect sales tax on rentals that are exempt from it by law. Apartments on Airbnb & Co. would then automatically become more expensive for everyone.
For months, Brussels has been trying to tax income from short-term rentals more efficiently with several directive procedures. With the new initiatives, Gentiloni believes, the gap could be reduced by 18 billion euros annually.
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New advance causes protest
But the fact that the platforms, as announced by the European Commission on December 8, 2022, should collect VAT from the tenants if the housing provider does not do so, is considered by those affected to be an unacceptable impertinence. “The EU Commission’s proposal would incorrectly classify Airbnb as an accommodation facility,” criticized an Airbnb spokeswoman on request. So far, Airbnb has only paid VAT on the service fee that it receives from the landlords for the mediation of their offers – and thus usually around 17 percent of the total overnight price.
de minimis limit
22,000
Euro
A landlord of short-term accommodation in Germany must pay VAT on this annual turnover.
In addition, the US group criticizes a violation of applicable tax law in many countries – including Germany. For example, VAT would be levied on millions of stays, even though the hosts are not taxable at all. So far, the landlord only has to pay VAT if he, as a professional entrepreneur, is above the de minimis limit. In Germany, for example, the VAT liability only begins with an annual turnover of 22,000 euros.
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Airbnb says: “The typical EU host earned just over 3,000 euros last year.” The vast majority of them are private individuals, and three quarters of the EU hosts only offer accommodation.
If all of these hosts were subject to VAT, they would have to charge vacationers in Germany an additional seven percent of the rental price. “This would make travel more expensive, slow down tourism recovery and hit individuals in the EU disproportionately hard,” warns an Airbnb spokeswoman.
Hotel association insists on equal competition
There is also another inconsistency: According to the planned EU regulation, private individuals and small businesses indirectly pay sales tax through Airbnb collection. Whether they can deduct input tax from these amounts as usual, i.e. the VAT they pay to suppliers themselves, remains open in the announcement from Brussels.
small business
3000
Euro
according to Airbnb, the “typical EU host” earned last year.
The German Hotel Association (IHA) holds against it. “For reasons of competition alone, we are concerned with tax honesty,” says Managing Director Markus Luthe. Investigations by several German authorities documented that things had been rather bad recently. The Hamburg tax investigators, together with other federal and state authorities, tried to persuade Airbnb to release landlord data from the years 2004 to 2006 in an international legal process lasting several years. Because the platform operator refused this, they went to court in Ireland – and were right in 2020.
A special unit based at the Karlsruhe-Durlach tax office then passed on 20,641 control notifications to the locally responsible German tax offices for verification – and achieved 69 million euros in retrospective income tax for the three years concerned, as reported by the hotel association.
According to experts, a model for the now planned VAT collection could be a model in Italy. There, the government decided in 2017 to demand a withholding tax of 21 percent from rental platforms such as Airbnb. Both income tax and value added tax are thereby settled. On December 22, 2022, the European Court of Justice (ECJ) confirmed the legality of the regulation. According to this, Airbnb has to withhold the withholding tax in cities like Venice and pay it to the state.
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Anja Karliczek, spokeswoman for tourism policy for the CDU/CSU parliamentary group in the Bundestag, also applauds the renewed push from Brussels: “I think it’s right and wise to oblige platforms to levy and pay taxes on customers instead of providers,” says you. Digital platforms would have to take responsibility here. “They have great power because they have relationships with customers,” observes the CDU politician, who worked in her parents’ hotel business for a long time.
In the fight against tax evasion, however, the Treasury already has far-reaching instruments. Since January 1, 2023, for example, the “Platform Tax Transparency Act” has been in force, which implemented the Brussels “DAC 7 Directive” of 2021 into German law. It obliges operators of digital platforms to report information on fees and commissions to the Federal Central Tax Office (BZSt) annually – always by January 31 of the following year. Based on the data, one wants to identify active providers and assess them for tax purposes.
In November 2022, the EU Commission also suggested an electronic system that companies should use to report every commercial transaction in real time via electronic invoices. Brussels is also planning to register short-term accommodation uniformly across the EU. Cross-border control is also to be made possible in this way.
More: Holiday home broker Fewo delays payments to landlords and customers