Home raids to ensure 5% VAT compliance
Tax Department officials will be conducting raids on homes and apartments in the coming days. They suspect that some property owners have taken advantage of the preferential framework for the reduced 5% VAT on primary residences but are now renting these properties illegally through platforms like AirBnB and Booking.com.
Many Cypriot and foreign buyers bought residential properties in recent years, paying only 5% VAT, intended for primary residence purposes. However, they have not used these properties as their main residences. Instead, most of them rent out these properties either on a monthly or daily basis, earning significant financial benefits.
According to the law, buyers who benefit from the 5% VAT and use the properties commercially are required to pay the standard VAT rate of 19% to the Tax Department.
With the upcoming summer holidays expected to increase the number of tourists choosing these properties for their stay, the Tax Department has decided to launch a new inspection campaign to identify those who have violated the law.
Raids and Inspections
Dozens of Tax Department officials will visit areas with rental homes or apartments to determine whether these properties are occupied by the buyer who benefited from the reduced VAT or by tenants. Previous inspections have shown that many properties are rented out instead of being used as primary residences, especially along the coast.
Tax Commissioner Sotiris Markides urges property buyers who benefited from the reduced 5% VAT rate and are using the properties commercially to comply with the law and pay the amounts owed to the state.
Speaking to Phileleftheros, he mentioned that it would be best for owners of such properties to voluntarily go to the Tax Department to pay the remaining 14% VAT, to avoid disturbing tourists during inspections. “We urge those who received the 5% VAT without being entitled to it to come to the Department to settle their debt,” he emphasized. He explained that a large number of department officials would be involved in the campaign, aiming to check properties one by one if possible. Additionally, 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 the imposition of interest and penalties,” he indicated.
VAT payment in Installments
Mr. Markides also told Phileleftheros that instructions were given to the District Offices of the Tax Department to accept the payment of the additional VAT owed by property owners in installments. Specifically, taxpayers will be able to settle their debts in 12 equal monthly instalments. The Tax Commissioner has the authority to approve an extension of the number of installments.
This is the second campaign carried out by the Tax Department to recover the additional VAT. During the previous campaign, department officials conducted 3,000 on-site housing inspections, identifying 500 buyers who had misused the reduced VAT. Additionally, another 500 taxpayers, after being informed about the campaign, voluntarily went to the Tax Department and paid the remaining 14% VAT owed to the state.
From the previous campaign, the Department’s coffers received nearly €40 million.
Cyprus Property News.