Airbnb
Airbnb is a global platform that helps people earn money from empty space by listing it for rent. Maltese properties can earn a month’s rent in less than 10 summer days, despite fluctuating listings.
In 2014, a total of 570,271 inbound tourists aged 25 to 44 years visited Malta. This is a segment that Airbnb actively targets, as this age group is willing to experiment with Airbnb’s software.
Airbnb provides an easy-to-use platform that charges a fee to the property owner based on the income generated. In addition, as a result of its popularity, Airbnb has also opened up this travel option to a multitude of individuals seeking short-lets at holiday destinations.
Malta
Malta has had a strong short-let market for a number of years and is well-positioned to be one of the most legislatively-advanced jurisdictions in relation to the provision of residential rental units be it for a whole property or a single bed in a person’s home. The reasons for this success include:
- a tourism authority that not only understands the need for this type of accommodation but collects data, publishes statistics, implements and actively enforces the requirements for such accommodation. Today private accommodation constitutes 25% of the bed stock utilised by tourists (source: NSO). Malta’s regulations cater for the rental of a whole property through the “Holiday Premises Regulations” and room rentals in one’s home through the “Host Family Accommodation Regulations”; and
- both VAT and income tax regulations cater for these types of accommodation.
Short-lets
Travellers often choose a short-term rental property as they would want to experience the true “feel” of a location, in addition to being a cost-effective solution for larger groups.
In Malta, a formal and informal short-term rental marketplace had existed prior to Airbnb, through a number of estate agencies coordinating short-lets on the local market, and by word of mouth.
Airbnb and other booking engines have shaken up the short-let rental market. Their technology’s efficiencies more easily connect property owners with tenants than traditional methods do. This simplification has encouraged property owners to list their properties.
When listing a property for short-lets, it is important to consider that the operational costs are different to costs for a long-term rental and that the property owner should undertake an analysis of the situation to ensure that it is a more rewarding position.
Zoning laws
Due to a lack of restrictions on where property owners can apply for a licence to host tourists, Malta stands at the forefront of the holiday rental industry. The Government also takes an extra step and, every year throughout the summer period, prohibits construction and demolition works in certain residential streets.
Tax considerations
In terms of tax considerations, the Maltese authorities have also enacted legislation to cater for the short-let market through provision of the preferential 7% VAT rate on rental income derived from tourists. In addition, all rental earnings derived from properties on a short-let basis are taxed on profits.
Also, the Government has enacted special provisions in the application of income tax when properties have rental income arising under the “Host Family Accommodation Regulations”.
Airbnb and Government
Airbnb and the Government could work together, with Airbnb collecting 7% VAT to increase government revenue. The Government could work with booking engines to ensure listings have a valid MTA reference number before upload.
Conclusion
Airbnb played a key role, driving sales and encouraging owners to enter the short-let rental market. Airbnb replaced middlemen and increased the tenant pool, enabling properties to be rented both short and long term. Malta gained as Airbnb reached new tourists, showcasing properties and making holidays more affordable.
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