Airbnb: How does it go from here?
Credit to Author: ATTY. MIKE GERALD C. DAVID, CPA| Date: Sat, 05 Jan 2019 18:27:12 +0000
Now that the holidays are over, where vacations were probably been spent out of town, many may have a recent memory of browsing through countless webpages for available lodging on top of booking their airline tickets and online banking. One of the probable scenarios is browsing through websites, such as Airbnb, and finding that perfect place to spend time with loved ones and celebrate the yuletide season.
To those still unfamiliar, Airbnb is a San Francisco-based online home-sharing platform founded in 2007 by Brian Chesky, Joe Gebbia, and Nathan Blecharczyk. The platform allows its users to choose and book accommodations among its 4 Million listings across 191 countries—where guests can settle from a tree house out in the woods or go big and rent an entire private island in Belize.
Airbnb stands for “air bed and breakfast” as derived from the play of words between “air bed” and “bed and breakfast” because the founders used an actual airbed to host their first guest in their own home and combined this with the concept of bed and breakfast that connotes a warmer welcome for guests as compared to that of hotels’. Hence, “airbedandbreakfast.com” or now, “airbnb.com” is born into the sharing economy industry and revolutionized the world of tourism.
Since it went online, Airbnb has now grown to be the third biggest private business in the world. Valued at around $30 billion (resource: Forbes), it nests way up there next to Uber (approx. $48 billion) and Xiaomi (approximately $50 billion).
Together with this growth, however, many issues revolve around this home-sharing platform — usually on the legal side of things. Known to somehow sidestep regulations on pricing and taxation, the platform has gained notoriety in many jurisdictions in the world. In fact, varying treatments have been done over the operations of Airbnb across the world, despite Airbnb’s efforts to ensure that each host is made aware of their local laws and regulations.
In New York City, hosts are required to register their domestic homes as rental properties should they use it for “Airbnb purposes.” Some cities/countries across the world, on top of requiring registration, impose a maximum number of days owners are allowed to rent-out such properties: Paris (120 days); Japan (180 days and must comply with safety rules similar to hotels); San Francisco (90 days where host must be a full-time resident of the property); and Amsterdam (30 days). Moreover, some jurisdictions, such as in Amsterdam, have begun to impose annual fees for tourist licensing for Airbnb hosts and implement measures that revolve on fire safety and guest protection.
Here in the Philippines, however, it can be said that there are no similar regulations in place aside from the general application of the New Civil Code under Articles 1642 to 1679 as to the relationship and responsibilities of Lessors & Lessees and the imposition of taxes under the Tax Code, as revised by Republic Act 10963 or the Tax Reform for Acceleration and Inclusion Act (Train) Act (Republic Act No. 10963) in 2018.
Specifically, rental of residential units (encompassing those listed in Airbnb) are taxed either through Value-added Tax (VAT) or percentage tax — determined primarily by the monthly rental fee per unit. If the rental fee per unit exceeds P15,000 per month and that the aggregate annual gross receipts exceed P3 million, VAT shall be imposed. Otherwise, if the monthly rental fee is more than P15,000 but annual gross receipts on rent do not exceed P3 million, the gross receipts shall be subject to a 3 percent Percentage Tax. This means that residential units rented out at not more than P15,000 are exempt from VAT and the 3 percent Percentage tax, regardless of the aggregate annual gross receipts.
If you ask me, is it legal to rent out on Airbnb? — yes, it is. Clearly, there is still a lot of room for regulating the conduct of this type of business in the country. Measures such as licensing, registration, and requirement of fees to operate are good ways on how to ensure the proper recording of transactions and the maintenance of a proper census of hosts and guests in a given locality.
What must be emphasized, however, is that the safety, satisfaction, and population of guests and hosts must be utmost importance to the law on top of maintaining a competitive pricing schemes between this sharing economy and that of the hotel industry—all in the name of preventing “over-tourism” or the substantial disruption of the prices and population of domestic tourism.
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