Why your Italian Airbnb is about to cost more

Italy has finally made a move against Airbnb and come June of 2017, things are going to change.

It’s difficult to really get a fixed number to asses the impact Airbnb has had in Italy’s major tourist destinations, because Airbnb hasn’t been sharing it, but the city of Rome, just as an example, has about 4,000 legally registered guesthouses and vacation rental apartments, whereas a search on Airbnb shows well over 12,000 results.

Despite having unlocked lots of amazing, well priced places to stay, the illegality it has promoted matters, and here’s why:

- Italy has strict anti-terrorist laws that requires all accommodation owners to register their guests with the police.  So far this has helped police to track anyone, visitors and residents alike, who are staying somewhere other than their primary residence.  Accommodation providers that aren’t registered with the city, and thus illegal, have no way (and no reason) to register their guests, which undermines the efforts of law enforcement.

- Tourist tax.  Almost all major Italian cities now enforce a tourist tax, which is collected by the accommodation provider and then paid to the city.  Those that are illegal have no way (and again, no reason) to collect this, so a huge amount of money that’s needed for the upkeep and maintenance of cities that are heavily trafficked by tourists, goes unpaid.  Or worse, the accommodation providers collect the money from tourists, but then pocket it.

- Taxes.  Yes, no one likes to pay them.  But taxes do pay for the police, hospitals, firemen, and everything else that we hope is working well when we need it.

- Everything else under the table.  If you’re illegal, you can’t hire staff legally, can’t pay sales tax.  Essentially any services you hire out will be paid as an individual without the same contributions that businesses make that pays health insurance, unemployment, pensions – all the benefits that people rely on.

The new law and what it does:

- Packaged as a tax break, it gives the option to any private individual renting real estate for under 30 days to pay a flat 21% tax instead of the normal income tax that starts at 23% and goes up depending on one’s income.

- Obligates intermediaries, including on-line sites that collect payment from the guest, specifically Airbnb, to withhold the 21% and pay it directly to the tax authorities on behalf of the accommodation provider.

- Obligates the same intermediaries to report to the tax authorities all rentals taking place.

- Owners who don’t wish to pay the flat rate will have the amounts paid on their behalf put on credit toward whatever else they owe.

- This new law goes into effect as of June 2017.  The tax authority has 90 days to inform the public and other parties concerned how the reporting and payments will be done.

What we can expect:

Whatever the number of illegal properties are, those who are illegal cannot pay their taxes, either purposefully or because to do so would shed light on their own illegality.  Those people, as of June 2017, are going to see their takings drop 21%, which will surely force them to increase their prices, or to close down entirely for risk of getting fined for not having the proper authorisation.  Either way – we expect either the market will shrink, which will push prices up, or the market will remain the same size, but prices will increase to compensate.  Intermediates are also obligated to report (though it hasn’t been released how) all the details of each rental transaction.  This will mean the tax police will have detailed records of all Airbnb hosts, and those that are operating without authorisation will be easily identifiable.

Airbnb has been known to push back legally at legislation that can potentially hurt their revenues, so it’s possible that this law will be contested.  However, they’ve also recently made peace with San Francisco and NY, two of its biggest markets, by dropping lawsuits.

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