07.06.2024
Tax department officials will conduct raids on houses and apartments in the coming days. They suspect that some property owners have taken advantage of the 5% VAT reduction on primary residences but are now renting out these properties illegally through platforms such as AirBnB and Booking.com.
Many Cypriot and foreign buyers have purchased residential properties in recent years, paying as little as 5% VAT for primary residence purposes. However, they did not use the property as their primary residence. Instead, most of them rent out these properties either monthly or daily, reaping significant financial benefits.
According to the law, buyers benefiting from 5% VAT and using the property for commercial purposes are required to pay the standard VAT rate of 19% to the Tax Department.
As the coming summer is expected to increase the number of tourists choosing to stay at these properties, the Tax Administration has decided to launch a new inspection campaign to identify those who have broken the law.
Raids and inspections
Dozens of tax department officials will visit areas with rental houses or apartments to determine whether the properties are occupied by a buyer benefiting from the VAT cut or by tenants. Previous inspections have found many properties are rentals rather than being used as primary residences, particularly along the coast.
Tax Commissioner Sotiris Markides calls on property buyers who have taken advantage of the reduced 5% VAT rate and are using the property for commercial purposes to comply with the law and pay amounts due to the government.
He mentioned that it is best for owners of such properties to voluntarily go to the Tax Department to pay the remaining 14% VAT, so as not to disturb tourists during inspections. “We urge those who received 5% VAT without having the right to it to come to the Department to pay off their debt,” he emphasized. He explained that the campaign will involve a large number of department officials who will inspect properties one at a time if possible. In addition, they will also conduct checks on the pages of these platforms to confirm rentals or identify such cases. “We urge the public to comply with the law to avoid fines,” he said.
Payment of VAT in installments
Mr. Markides also said that district tax department offices have been instructed to accept payment of additional VAT due to property owners in installments. Specifically, taxpayers will be able to pay off their debts in 12 equal monthly payments. The Tax Commissioner has the right to approve an extension of the number of payments.
This is the second campaign carried out by the Tax Department to collect additional VAT. During the previous campaign, department staff carried out 3,000 on-site inspections of homes, identifying 500 buyers who were abusing the reduced VAT. In addition, another 500 taxpayers, having learned about the campaign, voluntarily contacted the Tax Department and paid the remaining 14% VAT due to the state.
During the previous campaign, the Department’s coffers received approximately 40 million euros.
