The Italian Tax Agency (ITA) recently issued a ruling (Ruling) upon request of the Italian Hotel Association (Federalberghi) to clarify the VAT treatment of certain on-line reservation services. In summary, the Ruling states that on-line reservation platforms established in a EU Member State other than Italy need to register in Italy for VAT purposes and apply Italian VAT, when acting as intermediary between guests and Italian owners of accommodations or private houses not provided with a VAT-ID number.

Qualification of the accommodations as non-taxable persons

According to the Ruling, individuals providing accommodation services do not automatically qualify as taxable persons for VAT purposes. It is necessary to assess whether the relevant activity can be considered carried out on an entrepreneurial basis. The ITA clarifies that it is the platform’s responsibility to ascertain whether this is the case or not. In this respect, the platform needs to assess whether the accommodation owner is registered for VAT purposes: if the owner is registered for VAT purposes, than the owner will be qualified as a taxable person, otherwise the owner will be qualified as a non-taxable person.

The interpretation adopted in the Ruling is consistent with certain previous guidelines of the ITA, indicating that a service provider is entitled to qualify the customer as a taxable person only in case a VAT-ID number was obtained.

However, such a position does not seem to be compliant with EU law as interpreted by the Court of Justice of the European Union, according to which the notion of “taxable person” is defined on the basis of the factual circumstances of the case and despite any formality provided by the law. Also the European Commission adopted a different approach precisely in relation to the sharing economy, holding that, generally, an individual enrolled with a sharing economy platform should be considered a taxable person.

Qualification of the service provided by the platform

Amongst other, the Ruling clarifies that the service provided by the on-line reservation platform must be qualified as an intermediation service. This service will therefore be subject to Italian VAT as, pursuant to Italian place-of-supply rules, the place of supply is to be located in Italy in case of intermediation services provided to non-taxable persons, in connection with services that are localized in Italy for VAT purposes. This qualification applies regardless of whether the platform acts on behalf of the guest or the accommodation owner. On the other hand, according to the Ruling, the service cannot be qualified as “electronic supplied service” under Art. 7 of the Council Implementing Regulation No. 282/2011.

Consequences of the Ruling

As a result of the Ruling, if the on-line reservation platform does not obtain any VAT-ID number from the accommodation owner, it must treat the relevant transaction as a business-to-consumer (B2C) service. This service is to be localized in Italy for VAT purposes, and as a consequence, the on-line reservation platform needs to: (i) register in Italy for VAT purposes, by directly obtaining an Italian VAT number or appointing an Italian VAT representative; (ii) issue VAT invoices to the accommodation owner, applying Italian VAT. On the other hand, this service would not be subject to the reverse-charge regime, that is applicable to business-to-business (B2B) services only.

As, according to the Ruling, the service does not qualify as “electronic supplied service”, the on-line reservation platform would not be entitled to benefit from the mini one-stop-shop (MOSS) regime introduced by Directive 2008/8/EC.

Please note that a Ruling is binding only for the subject that is requesting it. Nevertheless, it will be used as a precedent in case of tax audits.