The Tax and Customs Board (MTA) has signed an agreement with Online accommodation and hospitality marketplace Airbnb which enables hosts to automatically report earnings.
The MTA and Airbnb held a joint press conference on Wednesday, announcing the agreement's signing as well as the new system and its rationale.
The main premise, according to MTA deputy director Rivo Reitmann, is to keep things simple, meaning that Airbnb hosts who declare their income in line with requirements have nothing to be worried about.
Voluntary info sharing
A reported 2,600 Airbnb hosts in Estonia accommodated 130,000 guests in 2017; on average an Airbnb host sharing their accommodation 24 nights in a year could bring in €1,500 for their troubles.
The new system rests on a voluntary basis, something Mr Reitmann said had already worked successfully with taxi hailing app Taxify and ridesharing app Uber, leading to a rise in revenue on a yearly basis.
Under the voluntary system, an Airbnb host simply has to give consent to the company to share their details with the MTA, after which any tax payable will be calculated and added to the individual's tax return for the year.
The simplification is in line with both Estonian authorities' vision of a streamlined, e-Estonia, and Airbnb's mission to evangelise the home-sharing economy globally.
Where it differs from Taxify and Uber is that the agreement is international, whereas the latter retain local representatives in Estonia.
"We believe tax collection needs to be simple, clear and user-friendly. The online sharing economy allows people to provide services in an efficient manner, but also make it easier to fulfil tax obligations. The collaboration with Airbnb will make paying taxes even simpler for hosts who share their homes in Estonia,'' said Mr Reitmann.
First of its kind
Airbnb's Director for Public Policy for Europe, the Middle East and North Africa, Patrick Robinson, said that whilst the company has concluded around 500 agreements with national authorities worldwide, Estonia, was the first place where user-friendly tech had been used in this way.
"Hosts want to pay their fair share of tax and we want to help. By working together with the Estonian authorities, a champion in e-governance and strong supporter of the sharing economy, we are making income tax simpler for hosts, while helping the government to benefit from new revenue streams generated by home sharing. We want to be good partners in Estonia and work with more governments around the world to spread the benefits of home sharing,'' Mr Robinson said.
The voluntary reporting tool goes live to users on 14 December, it is reported.
Since 2016 legal individuals have been requried, when submitting a tax return, to declare any rental income, which is subject to income tax. The Estonian Association of Hotels and Restaurants (EHRL) had earlier criticised Airbnb for unfair competition and encouraging a hidden economy in the sector.
Editor: Andrew Whyte