Airbnb audits in Cyprus

Airbnb audits on detached houses and apartments are being prepared in Cyprus by the tax department to identify which are operating as businesses on the platform. The reason is that many owners seem to have taken advantage of the preferential framework for reduced VAT for main residences in force in Cyprus, without complying to the required criteria.

In particular, as “Phileleuteros” reports that many Cypriot and foreign real estate buyers bought residential properties in previous years, paying only 5% VAT, for owner-occupation purposes. Afterwards, however, they did not use them as their main residences but rented them out, reaping significant financial benefits.

According to the legislation, buyers of real estate that benefit from the 5% and use it commercially must pay the Tax Department the normal rate of VAT, which is 19%. Tax Commissioner Sotiris Markidis calls on the buyers of the properties that benefited from the reduced rate of 5% VAT and are making commercial use of the buildings to comply with the law and pay the amounts owed to the state. In order to know who these owners are, Airbnb audits must be carried out.

Airbnb audits in tourist areas

As reported by the Tax Department, the Airbnb audits start now that it is the summer season and Airbnb style accommodations in Cyprus are full of tourists. So the auditors will go to areas with rental houses or apartments, to determine whether they are occupied by the buyer who benefited from the reduced VAT or by visitors, with rent.

Mr. Markidis, speaking to “F”, 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 i.e their guests, are not disturbed during the officials’ checks.

“We urge those who received 5% VAT without being entitled to it to come to the Department to settle their debt,” he stressed. He explained that a large number of department officials will be involved in the campaign, with the aim of checking – if possible – the properties one by one. At the same time, he noted that they will also carry out checks on the pages of the specific platforms, to confirm the rental or to identify such cases. “We urge people to comply with the law to avoid the imposition of interest and charges,” he said.

Incremental payments

Mr. Markidis also told “F” that instructions were also given to the District Offices of the Tax Department to accept incremental payment of the additional VAT that the property owners will have to pay. Specifically, taxpayers will be able to pay off their debts through 12 equal monthly installments. The Tax Commissioner has the right to approve an extension of the number of installments.

This is the second Airbnb audit campaign conducted by the Tax Department to recover the additional VAT. During the previous campaign, officers of the Department carried out 3,000 on-site house checks, 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 owed to the state.

From the previous campaign, almost €40 million ended up in the Department’s coffers.

Source: Phileleftheros