Filenews 6 June 2024
Officials of the Tax Department will be investigating 'airbnb' houses and apartments in the coming days where they believe that their owners benefited from the preferential framework for reduced VAT for main residences but currently rent them illegally through the online platforms Airbnb and Booking.
Many Cypriot and foreign property buyers bought residential properties in previous years, paying only 5% VAT, for home ownership purposes, but then did not use them as their main places of residence. Most of them rent the properties, either by the month or by the day, reaping great financial benefit.
According to the legislation, buyers of real estate who benefit from 5% and use them commercially, must pay to the Tax Department the standard VAT rate, which is 19%.
Due to the upcoming summer holidays, the number of tourists who will come to the island and choose these premises for their stay is expected to increase, the Tax Department decided to organize a new audit campaign to identify those who have violated the law.
Raids and controls
Dozens of officers of the Department will go to areas with rented houses or apartments, in an effort to find out if they are inhabited by the buyer who benefited from the reduced VAT or by visitors, with rent. As previous audits have shown, there are many cases where properties are rented instead of being used as main residences, especially on the coast.
The Commissioner of Taxation, Sotiris Markides, calls on buyers of properties that benefit from the reduced rate of 5% VAT and commercially utilize buildings to comply with the law and pay the amounts owed to the state.
Speaking to "F", he said that it would be good for the owners of such properties to voluntarily go to the Tax Department to pay the remaining 14% VAT, so that tourists are not disturbed during the checks of the officers.
"We urge those who took 5% VAT without being entitled to come to the Department to settle their debt," he said. He explained that a large number of officers of the department will be involved in the campaign, with the aim of checking -if possible- one by one the properties. At the same time, he noted that they will also carry out checks on the pages of these platforms to confirm the rental of premises or identify such cases. "We urge people to comply with the law to avoid imposing interest and charges," he said.
Repayment by instalments
Mr. Markides also told "F" that instructions were also given to the District Offices of the Tax Department to accept in instalments the payment of the additional VAT that property owners will have to pay. Specifically, taxpayers will be able to pay off their debts through 12 equal monthly instalments. The Commissioner of Taxation has the right to approve an extension of the number of instalments.
This is the second campaign carried out by the Tax Department to recover the additional VAT. During the previous campaign, Department officers carried out 3,000 on-site inspections of homes, identifying 500 buyers who had abused the reduced VAT. Also, another 500 taxpayers, after being informed about the campaign, voluntarily went to the Tax Department and paid the remaining 14% VAT they owed to the state.
Since the previous campaign, almost €40 million has ended up in the Department's coffers.
