Online platforms for short-term rentals and transportation services, such as Airbnb and Uber, will have to charge VAT from 2030 at the latest, as the EU recently approved new rules for online services.
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00:00Unlike this hotel, the online platforms such as Airbnb and others do not have to collect
00:22VAT.
00:23That gives the online economy an edge over the real world rivals.
00:28To resolve this, the EU recently approved new rules for the VAT in the digital age.
00:34EU decodes checks how this will affect the bottom line for short time rentals and ride
00:39hailing services.
00:40The EU wants to level the playing field on VAT for tourist accommodation and chauffeur-driven
00:45car transport.
00:47Online platforms such as Airbnb, Uber and Bolt will need to collect VAT just as other
00:53businesses do.
00:55VAT could amount to as much as 25% and the rule would apply from 2030.
01:07But when you tax squeezed company profits, it's often the customer that ends up paying
01:13a higher price.
01:16So let's see what some people in Brussels and in Athens think of this idea.
01:46I think it could put people off travelling, so yeah, I think that would be quite impactful.
02:01It makes it fair if they have to do it as well, because we're paying in hotels, so why
02:05shouldn't you pay with an Airbnb?
02:07And the money's raised helps the protection of the city and keeps it clean and makes the
02:13tourist attractions more attractive.
02:15It'll either force Airbnb providers to lower their prices a little bit or the demand will
02:21go down, I guess.
02:22Jack Shickler will help us decode the new rules.
02:26So the online companies themselves will collect VAT, not the service providers such as landlords
02:33of apartments or car drivers.
02:36Why is that?
02:37On platforms like Airbnb, you have a large online platform, Airbnb itself, where actually
02:42a lot of the services are technically supplied by very small-scale landlords, people renting
02:48a spare room or renting an apartment.
02:50And on Uber, similarly, you've got lots of drivers who possibly aren't earning a huge
02:54amount of money, don't have to register for VAT, or they're a little bit of a legal grey
02:58area whether they need to register for the VAT.
03:01So the European Commission came along and said, hang on, you've got these big, often
03:06US platforms selling services, raising tens of billions, hundreds of billions in revenues,
03:12and they're not paying VAT, while they're also competing against a lot of companies
03:16that do have to pay VAT.
03:18But some member states were not very keen on having these new rules.
03:23What concessions did they seek?
03:25Exactly.
03:26It's always very difficult agreeing EU tax laws because they have to be agreed unanimously
03:30by all 27 member states.
03:32And in this case, there was one in particular that was pretty firmly opposed.
03:37It was Estonia, which is the home of Bolt, one of the ride-sharing companies that would
03:41be very affected by this measure.
03:43It took a number of years of negotiation for them to lift their veto, and it seems that
03:48they got a couple of concessions that the rules won't apply until 2030, won't apply
03:52in full at least until 2030, plus there's an extra couple of carve-outs exemptions that
03:59allow them to remove certain categories of small businesses from the tax.
04:04And what impact is expected in terms of collection of VAT on the online economy?
04:09Well, some estimates say there could be tens of billions in extra taxes collected as a
04:13result of this move.
04:14That was the Commission's original estimate.
04:17So most people will notice that in the form of higher prices because it's likely that
04:21those extra taxes will be passed on to the customers of Airbnb, people buying holiday
04:26lettings or people getting an Uber.
04:31That's the immediate impact.
04:32We are going to have to see how individual member states implement these measures because
04:36they have a number of years to do so and a number of different ways they might choose
04:40how to apply certain exemptions and so on.
04:44Every year around 1 trillion euros in VAT revenue is collected in the EU, making it
04:49a key source of budgets in the member states.
04:51It is also an important resource for the EU's collective budget, which received 22 billion
04:56euros in 2023 alone.
05:00Estimates suggest that 6 billion euros in VAT per year could be raised from platforms
05:04providing short-term rentals and ride-hailing services.
05:08With us is Victoria Molnar, Secretary-General of the European Holiday Home Association.
05:14Isn't it just fair that the online platforms collect and pay VAT just as traditional businesses
05:23do?
05:24In our view, in the industry's view, we believe that it is unfair and the deemed supplier
05:29regime which is being introduced on online short-term rental platforms and also transportation
05:34platforms, we believe it does the opposite.
05:36It actually defeats the level playing field between the online short-term rental accommodation
05:41and the traditional businesses' hotels.
05:43It will of course increase the prices for the consumers, it will impose unfair obligations
05:49to online platforms, especially those which are doing business across the borders.
05:54How it will impact the small owners that use the online platforms somehow to enhance their
06:02business?
06:03In our view, these two categories, private people and exempt from VAT enterprises which
06:08are offering short-term rental accommodation on online platform, they will be pushed in
06:12a disadvantaged position for the benefit of the traditional accommodation businesses such
06:17as hotels.
06:18Why?
06:19Because the price will increase for the consumer, meaning that consumers will start searching
06:24for cheaper accommodation options.
06:27And second, these two categories, private people and exempt from VAT enterprises will
06:31have no right to deduct input VAT.
06:34So in other words, these two categories online will be treated as businesses but actually
06:41without any business rights and privileges.
06:46You will have some time to accommodate these new rules.
06:52They will become mandatory only in 2030.
06:55Is this enough for you to prepare?
06:58We believe that it will cause extreme fragmentation for online platforms of any size and shape
07:03in the EU because they will eventually have to understand and adapt to 27 different deemed
07:10supply regimes in member states.
07:12And adapting to these rules really requires a lot of time.
07:16It is not just pressing one button and online platforms will comply with it.
07:20It requires lots of resources, time, energy, financial resources to comply with such complex
07:27rules.
07:28Short-term rental is currently a count for around a quarter of touristic accommodations
07:33in the European Union.
07:35Ride-hailing is a common place across the bloc's countries.
07:45But by imposing VAT on these online businesses, does Europe risk killing the goose which lays
07:51the golden eggs?
07:52I'll be back next week for more EU Decoding.