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Wednesday 08.04.2020 | Name days: Dana, Dans, Danute, Edgars

Airbnb and Vilnius sign «historic» agreement, taxmen to zero in on short-term rentals

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Airbnb, Vilnius, taxes, deal, business, Linas Jegelevičius for BNN

Long chastised for little regulation, Airbnb, a popular short-term rentals platform, was praised this week in Lithuania after capital city Vilnius and Airbnb inked an agreement, envisioning that from February 1 onwards Airbnb will automatically collect Vilnius city tourism tax due per night and per person and transfer the sum directly to the City of Vilnius on behalf of hosts. It is thought that the measure will enforce more control on Airbnb rental providers.

Levy to be deducted during booking

Vilnius authorities say agreement, among other things, will decrease the administrative workload of tourism organisations and hosts. The levies will be collected from tourists during the booking process. Thus, Airbnb becomes the first booking platform to automatically collect tourism levies for guests staying not only in Lithuania, but in the Baltic States as a whole.

It is believed Lithuania hosts around 3000 Airbnb accommodations, the bulk of which is registered in Vilnius. Meanwhile, those letting their properties via the platform will still need to collect the tourist tax, as there are no plans to change this system.

Reflecting on the accord, Inga Romanovskienė, Director of Vilnius city tourism and Go Vilnius, lauded it, saying that it marks a «significant improvement» for the administration of the city tax for hosts and tourists alike and will allow to discover Vilnius by more and more tourists as «an amazing place.»

VMI sets eyes on short rentals

Yet cognizant of the gaps in regulation of Airbnb rentals in the country, the State Tax Inspectorate (VMI) meanwhile said this week Airbnb sector will be in its «direct focus» as part of the campaign aimed to crackdown on shadow economy, which short rentals are so notorious for in the country.

Speaking in a conference this past Tuesday VMI Deputy Head Artūras Klerauskas said that, this year, VMI plans to intensify its scrutiny of people who list properties on Airbnb and, as well as people engaged in virtual currency trading, and those offering electronic and telecommunications services on various international platforms, like Amazon and Ebay.  Over 160 million euros in various taxes, including some 100 million euros in VAT, were pulled out of the shadow economy in 2019, he said.

Praises from LVRA leader

 Evalda Šiškauskienė, president of the Lithuanian Hotel and Restaurant Association (LVRA), who criticised Lithuania’s Airbnb on multiple occasions in the past, was also welcoming this week’s news as a possible «gamechanger» in Lithuania’s Airbnb sector.

«What Vilnius did was really unthinkable just a couple of years ago. This kind of agreement will certainly help us effectively tackle the problem of unaccounted tourists using Airbnb services in Vilnius. Until now, the Airbnb tourists would evade any statistics. The collection of Vilnius City tax directly through each Airbnb reservation is a big alleviation for Vilnius,” Šiškauskienė told BNN.

Vilnius introduced the tourist tax of 1 euro per tourist in July, 2018 and collected 1.878 million euros in revenue from such a tax last year, including 98,000 euros from private renters.

Airbnb faced criticism

Speaking to a Lithuanian outlet a couple of years ago, Šiškauskienė complained that bed-and-breakfast services and short-term accommodation rentals to tourists in Lithuania are under-regulated, which skews national tourism statistics and fails to ensure proper safety and sanitary standards.

«Many of these establishments operate in a semi-legal environment…For instance, they do not pay fees to the Lithuanian Copyright Protection Association or Lithuanian Neighbouring Rights Association that hotels are subject to. Many also escape the pillow tax or do not pay any taxes at all. Moreover, short-rental properties are not required to meet fire safety and sanitary requirements…Right now, anyone can take out a business certificate to provide bed-and-breakfast services, for any property. The tax inspectorate does not even require any proof of owning the property. This kind of regulation has doubtlessly contributed to the spread of semi-legal accommodation establishments,» the LVRA head was quoted as saying by Lithuanian media in 2017.

Homework is needed

But now Šiškauskienė is hopeful that the situation will improve as a result of agreement between Vilnius and Airbnb. «Such agreement is a prerequisite for further improvements in the areas mentioned by you in my interview from a couple of years ago. The arrangement between Vilnius City and Airbnb will effectively legalize the entire sector,» she accentuated. «I hope that Lithuania’s Tax Inspectorate will also do homework on its behalf, obligating all Airbnb rental owners to write the number of their VMI-issued licenses under the advertisements. This would allow to track every owner of a short-term rental and put Airbnb and rentals and hotels in equal competition,» she said.

Apples and oranges

Counter-arguing Irena Švanienė, head of Association of Private Accommodation Service Providers in Lithuania’s Baltic resort of Palanga, told BNN that hotels and Airbnb’s short-rentals cannot be put on par «in any way». «Private landlords in Palanga operate three months (every year), meanwhile the majority of the local hotels work every single day. It is therefore unfair to apply the same rules. Both sectors are like apples and oranges,» she emphasised.

Tough Airbnb regulation elsewhere

Some other major European cities are far from being so friendly to Airbnb as Vilnius. Barcelona, for example, where 9.6% of all homes in its Old Town had been listed on Airbnb, ceased recently issuing new tourism housing licences, without which short-term rentals are illegal. The city council claims that the platform prompts speculation and illicit economies and its activities often cause nuisance and complaints from neighbours in proximity to Airbnb rentals.

Interestingly, many other megapolises also have taken measures to rein in Airbnb rentals. A quick search on the internet reveals that Amsterdam has limited entire home rentals to 60 days a year, which already took a toll on the business. In Berlin, landlords need a permit to rent 50% or more of their main residence for a short period. In London, short-term rentals for whole homes limited to 90 days a year. Spain’s Palma Mayor has announced a ban on short-term flat rentals. Meanwhile, in Paris, short-term rentals are limited to 120 days a year. Airbnb is accessible in 62 languages across 191 countries and regions. The company boasts over 7 million registered accommodations.

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