Airbnb regulations in Cyprus – Taxation

Cyprus: Airbnb regulations in Cyprus

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The rules | Fines | The Grace Period | The Application | License

The island of Cyprus being considered a hot spot for tourists, welcomed 4 million people in 2019 for a turnover of 2.7 billion euros. Obviously, one of the main sources of income for the island is tourism. This has created an alternative market for accommodation. With the obvious choice being the hotels with a lot of offers in Cyprus, there are also many people who prefer a more personal and economical experience when traveling.

Platforms like Airbnb have become very popular among vacationers. Property owners have been successful in operating their properties and generating higher levels of income by operating as self-catering accommodation. Their clients will often not only get accommodation at a better price, but properties will vary in style, size and location, giving them a more personalized option and closer to each person’s different needs.

The increase in independent housing through various platforms has also created the need for their regulation. Self-catering accommodation has been pretty run out of control which has caused some problems in the industry. When offering a service, especially when it may involve dealing with families who have young children, it is important to have protocols and requirements in place to ensure safety. With the aim of improving the quality of service offered through platforms such as Airbnb while increasing public revenue, the House of Representatives adopted an amendment to the existing law (the Regulation on Establishment and operation of hotels and tourist accommodation (amending) Law 2020 (9 (I) / 2020)) on January 17 and published it in the Official Journal on February 7, 2020.

How will the amendment be implemented?

Essentially, the amendment aims to create a platform in which all accommodation with food service is registered and it will be owned by the Deputy Minister of Tourism. The definition of independent accommodation is given as:

  • either a single furnished tourist mansion, or a single residence, or a single apartment, which constitutes “a unit” within the meaning of the provisions of the Real Property Law (Tenure, Registration and Valuation), which does not constitute a ” hotel ”or“ accommodation ”as defined in part II and part III of the same law;
  • which is rented out as a mansion or residence or unit and not as part of it, and
  • is registered in the Register of Self-Employed Dwellings under the provisions of Part IIIA “for the purposes of the law.

Breaking the law can be punished with one year’s imprisonment and / or a fine not exceeding 5,000 euros

It is prohibited to otherwise provide self-catering accommodation services unless the requirements are met. It is important to note that any unit advertised on platforms such as Airbnb and Booking.com that has not been registered on the platform may be guilty of an offense punishable by a penalty of up to up to 1 year imprisonment and / or a fine not exceeding 5,000 euros.

A grace period?

Before the changes are enacted, any existing independent hosting provider will have a 2-year grace period to comply with the regulations.

Request for self-catering accommodation services offer (Airbnb style) in Cyprus

Any property manager or owner who wishes to offer independent accommodation services will need to submit a request to be added to the registry. The application must contain the characteristics and technical specifications of the unit as well as the certifications which show that it has been built in accordance with the approved construction plans with all the necessary safety controls. After the request, the Ministry of Tourism will review each request within 2 months and, if successful, grant a unique registration number.

Licenses are granted for a period of 3 years after which they must be renewed. Application fees are based on the size and features of the offered unit. In certain circumstances, the license may be revoked at the discretion of the ministry for various reasons. For example, if the license was obtained under false pretenses, the business has ceased operations, or the owner is convicted of a serious crime are all grounds for potential license revocation.

Registration with the tax service will be required and a tax number will need to be obtained for each unit. Income tax will be applicable on all income generated by the catering unit. If the service provider is a foreign tax resident, the income tax will still be applied in Cyprus due to the fact that it is income generated in the country through real estate. The only time this might not apply is if there are tax treaties between countries that can offer tax relief.

The importance of understanding changes in theory and in practice

The continuing need for regulatory harmonization to provide broader coverage of hitherto neglected aspects of the business is clear. With the end of the 2 year grace period for existing self-catering dwellings from the time the regulatory changes were passed, this is fast approaching. This creates the need for owners and managers who provide independent accommodation to be well advised and to understand how the rules apply to their transactions, in order to avoid any penalties in the future.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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