Cyprus Tax Authorities to Check Homes and Apartments Purchased with 5% VAT: Are They Being Rented Out?

In the coming days, the Tax Department of the Republic of Cyprus will conduct a series of inspections of homes and apartments whose owners paid 5% VAT at the time of purchase, claiming that the property was their first and primary residence. According to current laws, owners are not allowed to rent out such properties either on a short-term or long-term basis for commercial gain.

How Will the Checks Be Conducted?

The Tax Department has organized a campaign to identify those who violate this law.

1) Dozens of department employees will carry out inspections of apartments and houses sold with the reduced 5% VAT rate. They will visit these properties both in the evenings and on weekends.

2) Additionally, department representatives will review listings of properties offered for short-term rental on popular online platforms such as Airbnb and Booking.

If tenants are found living in the properties, the owners will be required to pay the difference between the reduced 5% VAT and the standard 19% VAT.

It's Better to Pay the Difference Voluntarily

The head of the Tax Department, Sotiris Markidis, urged property owners who have taken advantage of the reduced tax rate but are using the homes and apartments for commercial purposes to comply with the law and pay the amounts due to the state.

The right to the 5% VAT rate on the purchase of primary market housing is available to both citizens of the Republic of Cyprus and citizens of other EU and third countries. The main condition is that the owner or their family must live in the apartment or house.

As Sotiris Markidis explained to Phileleftheros, it is better to pay the 14% difference between the reduced and standard tax rates voluntarily to avoid disturbing tourists who have rented the property for a short term during tax inspections.

— We urge property owners to comply with the law to avoid interest and penalties, — said the head of the Tax Department.

This Will Be the Second Inspection

This will be the second campaign to check compliance with the law on the use of housing purchased with a reduced VAT rate. During the first inspection, which took place in the fall of 2022, tax department employees visited about 3,000 properties. In approximately 500 cases, the law was violated. Another 500 property owners voluntarily came forward and paid the difference because they were using or planning to use their homes and apartments for rental purposes.