Accommodation website Airbnb has agreed to pay the Italian tax authorities €576m ($620m; £496m) to settle a tax dispute.

Italy says the amount relates to money the company had failed to collect in income taxes owed by people who rented out rooms or properties on the short-term rental giant Airbnb site.

Landlords in Italy are required to pay a 21% tax on their earnings.

Airbnb said it would not seek to recover the unpaid taxes from hosts.

Last month, an Italian judge ordered the seizure of €779.5m from Airbnb’s European headquarters in Ireland for alleged tax evasion for the 2017-21 tax years. The firm has agreed to pay about three-quarters of what is owed by thousands of landlords.

Italy, with tourist hotspots like Venice, Florence and Rome, is an important market for the firm. The Italian authorities have recently launched inquiries into tax practices of major companies such as Airbnb.

In 2022, Airbnb, which has been operating in the country since 2008, challenged the Italian law that requires short-term rental providers to withhold 21% of the rental income from landlords and pay it to tax authorities.

The company argued that this law on taxation contravened the EU’s principle of freedom to provide services across the 27-country bloc.

But the EU Court of Justice ruled that Airbnb must abide by the law.

In November, Italian prosecutors said that the company failed to collect taxes from landlords on nearly €3.7bn ($4bn; £3bn) of rental income.

Airbnb says the vast majority of landlords are ordinary families seeking to supplement their income. The firm said it would not seek to recover the outstanding sum from its hosts.

Prime Minister Giorgia Meloni’s government has been trying to rein in tourist rentals by fighting tax evasion by owners of short-term lettings. It is planning to raise taxes from 21% to 26%.

The latest move is a victory for the government. It will also please some hotel owners, who argue that sites such as Airbnb have posed unfair competition.