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Booking.com, the online travel agent, is the focus of an investigation in Italy into $167m of unpaid VAT on holiday rentals made through its website.
Two sources told the FT that the inquiry is focusing on the VAT owed on payments between individuals for rental properties advertised by the popular hotel and holidays booking site. This means that professional hotels, which are already registered to pay the tax, are not part of the investigation.
As there is no automated system for VAT payments, the government can stand to lose a substantial amount of the tax it is owed over time.
Prosecutors in Italy are investigating whether Booking.com should be liable for paying the VAT for payments made between 2013 and 2018, as this has not yet been paid. The $167M figure is only an estimate based on the company’s revenues in Italy and interviews that police have conducted with individuals using the site, the sources said.
The Italian authorities had issued a European investigator order (EIO) to authorities in the Netherlands, where Booking.com is based, their counterparts declined to look into the case any further, another person with direct knowledge of the investigation told the FT. Now, the Italian authorities want to file another EIO to push the case forward.
In response, Booking.com has sent a statement that says that it hasn’t been contacted by the Italian authorities about any issue, and therefore it has no details of any investigation.
“Without this information, we cannot comment on this,” a spokesperson said.
It said that it charges commission to those listing rentals on the site, and that this is subject to VAT.
“By law it is the responsibility of partners to report this directly to [their] local government. In several non-EU countries, laws require us to charge some of our accommodation partners VAT or GST on top of our commission. The VAT or GST collected in these instances is submitted to the local tax authorities,” the spokesperson added.
Rival Airbnb collects the VAT money owed and pays it directly to the Italian government.
The investigation is the latest in a long line of disputes between governments and digital companies in regards to how much tax is owed and how the payment should be passed on.
In March, the UK’s HM Revenue & Customs (HMRC) issued a call for evidence for the role of online platforms in ensuring tax compliance by their users. This included the likes of Airbnb, Booking.com, Uber and other companies.