3 ms·

Well, depending on the actual situation it might or might not be "insane". I mean, why is AirBnB responsible for withholding taxes from people who are not their

Well, depending on the actual situation it might or might not be "insane". I mean, why is AirBnB responsible for withholding taxes from people who are not their employees? Or even are individual business owners? When you go to a restaurant for dinner do you withhold their income tax when paying the bill? No, because it's not your tax, not your problem.

gpderetta 3y ago
> why is AirBnB responsible for withholding taxes from people who are not their employees Because apparently the law says so? Rent income is already taxed at a flat rate (at a relatively generous 21%) as opposed of using the marginal tax rate. Also VAT and sale taxes are commonly withheld at payment. In UK it was the rule until a few years ago for banks to withhold tax on interest income.
- rsynnott 3y ago
  > In UK it was the rule until a few years ago for banks to withhold tax on interest income. Huh, is it not anymore? I thought virtually everywhere did that; I'd expect compliance to be _extremely_ low where it's not done.
  - lotsofpulp 3y ago
    It is optional in the US. It gets reported to the tax agencies anyway, so the government will easily know if you did or did not pay.
  - gpderetta 3y ago
    IIRC it changed a few years ago: I think the interest personal allowance became more generous, so most people in practice don't pay tax on interest (especially with interests being so low in the last decade), and those that do, have very different marginal rates, so it made less sense to be paid at source. Banks share information with HMRC, so I expect that compliance is still high, but it is a bit annoying that our tax returns are not prefilled with this info.
  - Liquid_Fire 3y ago
    They will report your income to the tax agency, but they don't withhold taxes themselves.
jsnell 3y ago
I don't really understand your objection. Tax withholding is in no way specific to income tax. For example, it is not uncommon for that to happen for dividends and interest, despite there being no employment relationship there. Even VAT is a withholding scheme at heart, which makes your restaurant example kind of funny :) The VAT on that meal you eat at a restaurant is paid by you as the consumer, but collected and paid to the tax authorities (i.e. withheld) by the restaurant.
- pests 3y ago
  Honest question - how does it work in that situation with a third party like food delivery? You pay the food delivery company who pays the restaurant. The food delivery is going to take taxes from you I assume, but do they then pay taxes to the restaurant too who goes on to pay them? Isnt AirBnB like the delivery driver in this situation? DoorDash, in America for example, collects the tax for the food, passes it to the restaurant, who pays their own tax. Isn't AirBnB giving the collected tax money to the homeowner so they can pay correctly? I have no clue how it works over the pond so apologies if these are dumb questions.
  - locallost 3y ago
    If you pay the delivery they will pay the full VAT of the total amount, but will get refunded on the VAT they pay for the restaurant goods. Thus every business only pays the tax on the value added. Not sure if this is how food delivery actually gets paid, but if you pay them and they pass the money to the restaurant then yes. If they pass the full amount to the restaurant their VAT paid us effectively zero. But this case is not about VAT, but a rental tax. If Airbnb collects the money then I don't see why they wouldn't just pay the tax. I mean I know why - they don't want to include it in the price and make their product artificially cheaper by ignoring regulation, but tough luck.
  - arlcode 3y ago
    You pay full tax for the food + delivery. The delivery company pays VAT for the food and can substract that from their own VAT liabilities. In a strict B2B context it's also possible to do a net payment and that's why some (EU) stores will ask if you have valid tax id.
PeterisP 3y ago
Because they are getting the payment. If the customer would be paying the landlord directly, AirBnB wouldn't have the responsibilty, but since the customer is paying AirBnB, the buck stops there, they are fully responsible for that; the landlords aren't their employees but effectively are their subcontractors.
jaclaz 3y ago
Well, in that case you are a final customer, should you put on an online service allowing customers to book and pay for dinner in many different restaurants it would be different. In Italy it is a rather common occurrence in different fields to be required by Law to act as "sostituto d'imposta" (loosely translatable to "tax substitute", the real translation should be "witholding agent"), as an example banks when you pay through them certain types of services, or hotels when you pay the "city tax" for your stay, or firms hiring a consultant. The taxes are witheld and then paid directly to the revenue service (periodically), the idea is that instead of receiving millions or billions of small payments, the state receives much less larger (cumulative) payments. If we take as an example the city (tourist) tax, each customer should pay (say) 2 Euro for each night they stay in a hotel (or AirBnB), a (fully occupied) hotel with 200 beds would generate 200 small payments, 2 Euro each, per day, instead the hotel collects them (in name of the state) and pays in a single instance every three months, so instead of 3x200x30=18,000 micro payments, only one payment/transaction is generated.
Moto7451 3y ago
Taxes on short term rentals are generally consumption taxes and not income taxes. These are charged to Hotels in many places and in some cases they apply to AirBnBs. I have an AirBnB and am charged the same consumption taxes as a hotel in the same county. It’s fair from the perspective that Hilton and I are providing the same kind of service. AirBnB is on the hook to collect them because they’re the merchant collecting the overall fee. If I ran my own chain I’d be on the hook to collect the fee.
octacat 3y ago
Because the law says so, if you are not happy - leave the market or pay fines. Pretty much how platforms are collecting VAT now.
mytailorisrich 3y ago
It's the path of least resistance. They are facing a lot of tax evasion from landlords. On the other hand, all the money flows through AirBnb so making AirBnb withhold tax is the simplest and most effective option from the government's point of view.
rsynnott 3y ago
Withholding taxes are an extremely common mechanism, all sorts of businesses across Europe (and elsewhere) are required to administer them; the idea that the ECJ was going to go "actually, yeah, withholding taxes are illegal" was always pretty fanciful.

gpderetta 3y ago

> why is AirBnB responsible for withholding taxes from people who are not their employees Because apparently the law says so? Rent income is already taxed at a flat rate (at a relatively generous 21%) as opposed of using the marginal tax rate. Also VAT and sale taxes are commonly withheld at payment. In UK it was the rule until a few years ago for banks to withhold tax on interest income.

rsynnott 3y ago
> In UK it was the rule until a few years ago for banks to withhold tax on interest income. Huh, is it not anymore? I thought virtually everywhere did that; I'd expect compliance to be _extremely_ low where it's not done.
- lotsofpulp 3y ago
  It is optional in the US. It gets reported to the tax agencies anyway, so the government will easily know if you did or did not pay.
- gpderetta 3y ago
  IIRC it changed a few years ago: I think the interest personal allowance became more generous, so most people in practice don't pay tax on interest (especially with interests being so low in the last decade), and those that do, have very different marginal rates, so it made less sense to be paid at source. Banks share information with HMRC, so I expect that compliance is still high, but it is a bit annoying that our tax returns are not prefilled with this info.
- Liquid_Fire 3y ago
  They will report your income to the tax agency, but they don't withhold taxes themselves.

jsnell 3y ago

I don't really understand your objection. Tax withholding is in no way specific to income tax. For example, it is not uncommon for that to happen for dividends and interest, despite there being no employment relationship there. Even VAT is a withholding scheme at heart, which makes your restaurant example kind of funny :) The VAT on that meal you eat at a restaurant is paid by you as the consumer, but collected and paid to the tax authorities (i.e. withheld) by the restaurant.

pests 3y ago
Honest question - how does it work in that situation with a third party like food delivery? You pay the food delivery company who pays the restaurant. The food delivery is going to take taxes from you I assume, but do they then pay taxes to the restaurant too who goes on to pay them? Isnt AirBnB like the delivery driver in this situation? DoorDash, in America for example, collects the tax for the food, passes it to the restaurant, who pays their own tax. Isn't AirBnB giving the collected tax money to the homeowner so they can pay correctly? I have no clue how it works over the pond so apologies if these are dumb questions.
- locallost 3y ago
  If you pay the delivery they will pay the full VAT of the total amount, but will get refunded on the VAT they pay for the restaurant goods. Thus every business only pays the tax on the value added. Not sure if this is how food delivery actually gets paid, but if you pay them and they pass the money to the restaurant then yes. If they pass the full amount to the restaurant their VAT paid us effectively zero. But this case is not about VAT, but a rental tax. If Airbnb collects the money then I don't see why they wouldn't just pay the tax. I mean I know why - they don't want to include it in the price and make their product artificially cheaper by ignoring regulation, but tough luck.
- arlcode 3y ago
  You pay full tax for the food + delivery. The delivery company pays VAT for the food and can substract that from their own VAT liabilities. In a strict B2B context it's also possible to do a net payment and that's why some (EU) stores will ask if you have valid tax id.

PeterisP 3y ago

Because they are getting the payment. If the customer would be paying the landlord directly, AirBnB wouldn't have the responsibilty, but since the customer is paying AirBnB, the buck stops there, they are fully responsible for that; the landlords aren't their employees but effectively are their subcontractors.

jaclaz 3y ago

Well, in that case you are a final customer, should you put on an online service allowing customers to book and pay for dinner in many different restaurants it would be different. In Italy it is a rather common occurrence in different fields to be required by Law to act as "sostituto d'imposta" (loosely translatable to "tax substitute", the real translation should be "witholding agent"), as an example banks when you pay through them certain types of services, or hotels when you pay the "city tax" for your stay, or firms hiring a consultant. The taxes are witheld and then paid directly to the revenue service (periodically), the idea is that instead of receiving millions or billions of small payments, the state receives much less larger (cumulative) payments. If we take as an example the city (tourist) tax, each customer should pay (say) 2 Euro for each night they stay in a hotel (or AirBnB), a (fully occupied) hotel with 200 beds would generate 200 small payments, 2 Euro each, per day, instead the hotel collects them (in name of the state) and pays in a single instance every three months, so instead of 3x200x30=18,000 micro payments, only one payment/transaction is generated.

Moto7451 3y ago

Taxes on short term rentals are generally consumption taxes and not income taxes. These are charged to Hotels in many places and in some cases they apply to AirBnBs. I have an AirBnB and am charged the same consumption taxes as a hotel in the same county. It’s fair from the perspective that Hilton and I are providing the same kind of service. AirBnB is on the hook to collect them because they’re the merchant collecting the overall fee. If I ran my own chain I’d be on the hook to collect the fee.

octacat 3y ago

Because the law says so, if you are not happy - leave the market or pay fines. Pretty much how platforms are collecting VAT now.

mytailorisrich 3y ago

It's the path of least resistance. They are facing a lot of tax evasion from landlords. On the other hand, all the money flows through AirBnb so making AirBnb withhold tax is the simplest and most effective option from the government's point of view.

rsynnott 3y ago

Withholding taxes are an extremely common mechanism, all sorts of businesses across Europe (and elsewhere) are required to administer them; the idea that the ECJ was going to go "actually, yeah, withholding taxes are illegal" was always pretty fanciful.