Short-term accommodation services company Airbnb is obliged to provide information in rental contracts to tax authorities, an adviser to Europe's top court said on Thursday, in another potential legal setback in Europe for the company.

Airbnb has in recent years found itself at loggerheads with authorities in several European Union countries, arguing that taxation and other requirements contravene the EU principle of the freedom to provide services across the 27-country bloc.

The latest case involves a 2017 Italian law requiring Airbnb and other short-term rental sites to forward information from their rental contracts and withhold 21% from the rental income and pay it to tax authorities.

The company challenged the law in an Italian court which subsequently sought guidance from Luxembourg-based European Court of Justice (ECJ.

ECJ Advocate General Maciej Szpunar, whose opinion is non-binding but the ECJ usually follows four out of five such recommendations, backed the Italian law.

"Article 56 TFEU (Treaty on the Functioning of the European Union) in relation to the freedom to provide services does not preclude the obligation to collect and transmit information or to withhold tax," he said.

"It is perfectly consistent to impose the obligation to withhold tax on intermediaries involved in the payment of rent, given that the activity of a large number of natural persons who are not subject to the obligations incumbent on professionals is, by its nature, difficult to audit for tax purposes."

He agreed with Airbnb's argument in one aspect.

"However, the obligation to appoint a tax representative constitutes a disproportionate restriction on the freedom to provide services," Szpunar said.

The ECJ will rule on the case in coming months. In April, the court rejected a similar challenge by Airbnb to Belgian regional legislation requiring it to provide information to tax authorities on tourist transactions.

The case is C-83/21 Airbnb Ireland and Airbnb Payments UK. (Reporting by Foo Yun Chee; Editing by Emelia Sithole-Matarise)