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EU VAT and the sharing economy

The relationship between the concept of “taxable person” and Airbnb and Uber

Written by C. Lidström

Paper category

Master Thesis






Thesis: What is the "sharing economy"? Sharing economy is an informal definition, applicable to various new economic business models. Broadly speaking, the foundation of the sharing economy revolves around the sharing of assets or services between private individuals, generally through the Internet. 30 It is, however, that this is far from a unilateral phenomenon, because sharing activities can be promoted through a series of different channels, including traditional sharing, lending, leasing, bartering, trading, gifting, and exchange. 31 Among them, transactions are generally divided into four categories: profitable, free, through barter transactions, and cost-sharing arrangements. 32 Compared with more traditional business models, transactions in the sharing economy usually do not change ownership. 33 Normally, assets are initially purchased and used for private purposes, and only temporarily used in the market at a later stage. 34 By emphasizing acquisition rather than ownership, the sharing economy allows individuals to commercialize personal properties that may be idle or underutilized. Therefore, individuals can use untapped personal resources, such as cars and spare rooms, in a more effective way by bypassing traditional middlemen. 35 In this sense, the sharing economy encourages the rational use of resources and sustainable development. 36 Although technological progress accounts for the lion's share of the progress that makes the sharing economy possible, economic, political, and social changes have also contributed. In its newsletter on the European Agenda for the Cooperative Economy, the European Commission described the sharing economy as "a business model that promotes activities through a cooperative platform, which is an open market for temporary use of goods or services usually provided by individuals." 38 European Commission Three different types of participants are also specified: 1. Online sharing platform 2. Service provider 3. Service recipient 39 The order in which the main role is played is the earliest, that is, the platform. Through their technological infrastructure, they act as intermediaries between service providers and recipients, connecting them to each other and facilitating transactions between them. The next category is individual service providers, whose activities include allocating resources, assets, time, and skills through the platform. These can be individuals who provide services occasionally or professional actors who provide services habitually. The last group includes the users of the services provided, that is, the individuals who are the ultimate consumers. 2.2 Participants in the sharing economy 2.2.1 AirbnbAirbnb42's online sharing platform was established in 2008 to provide peer-to-peer accommodation services. It is becoming more and more popular. It currently has more than 70 million listings in more than 220 countries and regions, with an average of 1 million people staying on Airbnb every night. 43Airbnb connects individuals who are looking for a rental house (i.e. landlords) with those who are looking for free rooms (i.e. guests). The main motivation of Airbnb hosts is to have the opportunity to generate additional income from their idle space, and guests are usually motivated to use Airbnb because they enjoy a real travel experience, want to live like a local, and save money. 44 For individuals who want to use Airbnb to rent out their residences, they can register and list their homes on Airbnb for free. The homeowner determines more conditions, including the tenant’s price, schedule, and rules. After the listing, eligible tenants can contact and interact with the host. Once the 45 guests book a room, they charge the full amount set by the landlord. This payment is made through Airbnb through the guest’s preferred payment method, and thereafter is usually forwarded to the host 24 hours after the guest checks in. 46 The landlord and guest also need to pay a service fee. For the former, it is usually 3% of each booking. For the latter, it will vary based on various booking factors. 47 In addition to service fees, value-added tax is also charged according to the jurisdiction and laws involved. Within the European Union, customer service fees are subject to VAT. 482.2.2 Uber49 currently operates in about 80 countries and 800 metropolitan areas around the world, and is the world's largest and most well-known ride-sharing platform. It was founded in 2009 and is headquartered in San Francisco. 50 In order to use Uber's ride-sharing service, the service provider (the driver) and the service recipient (the passenger) must create an account on the Uber platform and enter certain information. Then, the Uber platform enables users to request a ride from their current location to another destination of their choice. After sending the request, nearby drivers will be notified and can accept or reject it within a limited time frame. If accepted, passengers will be able to see all details related to the trip, including the driver’s location, personal information, vehicle type and estimated time of arrival. After the ride, the rider will be prompted to rate the driver. Passengers do not need to pay specific fees or tips to the driver, because Uber provides a cashless payment process in which the fare is automatically charged from the passenger's registered debit or credit card. Read Less