Sharing economy targeted by Italian tax bill

Sharing economy platforms might be subject to burdensome obligations as a consequence of an Italian tax bill, but are such obligations compliant with EU laws? The proposal recently submitted to the Italian Parliament targets individuals that share their goods and services (e.g. their accommodation) by means of digital platforms where the platform – the so called “sharing economy platform” – is aimed at putting the parties into contact.

What are the obligations on the Shared Economy Platforms?

The bill provides for the obligations on the sharing economy platforms to, among others,

1. Act as withholding agents and withhold a fixed 10% amount on all the transactions relating to the “sharing” of products/services occurred by means of their platform and then transfer such amount to the State on behalf of their users;
2. Adopt a policy that shall provide, among others,
   1. The general terms and conditions of the platform which cannot contain some clauses identified as “black listed“;
   2. The performance of payments only through electronic means;
   3. A consistent process of collection of information to be collected about their users on registration in order to avoid fake profiles; and
   4. The outline of the insurance coverage required for the “shared” business and the obligation on platforms to check (how?) whether users comply with insurance obligations and
3. Submit the above mentioned policy to the Competition Authority for approval in order to be enrolled in the sharing economy platform registry which becomes a compulsory requirement.

Are such obligations legal?

The breach of the above mentioned obligations is sanctioned with fines up to 25% of the turnover generated by the sharing economy operator during the period in which it was not enrolled in the registry.

But, apart from some ambiguous contents of the proposal, the most interesting aspects from a legal standpoint are that

• In order to act as withholding agent foreign shared economy entities are required to establish a permanent establishment in Italy and
• The enrollment in the registry together with the required approval process becomes a prior authorization process to the offering of the services.

And such obligations are relevant since they might be considered in breach of the EU principles to provide services as well as the principles provided by the E-Commerce Directive since they might restrict “the freedom to provide information society services from another Member State” and make the offering of services by sharing economy platforms “subject to prior authorization“. Indeed a company based in a different EU Member State would be required to set up a permanent establishment in Italy (with consequential tax consequences) and go through a prior authorization process required for the enrollment in the registry set up by the competition authority.

It will be interesting to see how Italian authorities plan to amend to proposal in order to deal with such restrictions, but for the time being this remains an open question.

@GiulioCoraggio