EU to hike VAT on Airbnb, Uber after Estonia drops veto

EU diplomats have agreed a reform to VAT rules that would mean tax hikes on short-term rental and taxi-style services such as Airbnb and Uber, after Estonia dropped its opposition.

Estonia, home to ride-sharing app Bolt, had previously voiced concerns over unfair treatment of online platforms, and the often small-time suppliers that use them.

The redrafted text includes a longer transition period, meaning the online platform rules will become voluntary in July 2028 and mandatory from January 2030, an EU official told Euronews, speaking on condition of anonymity.

Estonian concerns over administrative burdens were apparently bought off by offering a more flexible regime for exempting small businesses. 

VAT, charged on the sale of goods and services at a rate as high as 25%, has been largely harmonised across the bloc for decades – but officials are worried online services are slipping through the net.

The new plans make online platforms such as Airbnb, Vrbo or Uber directly responsible for registering for the tax, rather than assuming their end users, drivers and landlords, will do so.

The European Commission put forward the plans in December 2022, but they’ve faced a tough time getting agreed given that any of the EU’s 27 member states wields a veto. 

Lobbyists for the conventional hotel industry, who already charge the tax, complained they face unfair competition from digital rivals – but Bolt has argued that many small-scale taxi drivers aren’t liable to pay VAT anyway. 

A spokesperson for the European Holiday Homes Association said VAT rules for online platforms are a “solution in search of a problem”.  

The law “will unfairly disadvantage services sold through platforms, lead to double taxation, hurt private providers seeking to supplement their income, make it nearly impossible for smaller platforms to implement, and raise prices across the board in the travel sector,” the EHHA, whose members include Airbnb and Vrbo, told Euronews in a statement.

The agreement in principle, announced in a post on X by the Hungarian EU Presidency, which is chairing talks among member states, clears the way for finance ministers to formally endorse the measures at a meeting next Tuesday, 5 November.  

It’s the latest plank in Brussels’ plans to bring digital services within the regulatory fold, following a March deal to improve labour rights for platform workers, such as Uber and Deliveroo drivers, who were previously treated as self-employed.