27 May 2021
The Rules | The Fines | The Grace Period | The Application | The License
The island of Cyprus being considered a hot spot for tourists, welcomed 4 million people in 2019 bringing 2.7 billion euros in revenue. Clearly, one of the island’s largest sources of income is tourism. This has created an alternative market for accommodation. The obvious choice being hotels with plenty on offer in Cyprus, there are also many people who prefer a more personal cost efficient experience when traveling.
Platforms such as Airbnb have become very popular among holidaymakers. Owners of properties have managed to exploit their properties and generate higher levels of income through operating as a self-catering accommodation. Their clients will often not only get a better priced accommodation but properties will vary in style, size and location giving them a more personalised option closer to everyone’s different needs.
The increase of self-catering accommodations through various platforms has also created the need for their regulation. Self-catering accommodation has been quite uncontrolled leading to some issues in the industry. When offering a service, especially, when it can involve dealing with families who have young children it is important to have protocols and requirements in place to ensure safety. In a bid to upgrade the quality of service offered through platforms such as Airbnb meanwhile raising the public revenue, the House of Representatives passed an amending of the governing law (the Regulation of the Establishment and Operation of Hotels and Tourist Accommodation (Amending) Law 2020 (9(I)/2020)) on the 17th of January and published it in the official Gazette on the 7th of February 2020.
How will the Amendment be implemented?
Essentially, the amendment aims to create a platform in which all self-catering service accommodations are registered and it will be held by the Deputy Ministry of Tourism. The definition of a self-catering accommodation is given as:
either a single tourist furnished mansion, or a single residence, or a single apartment, which constitutes “a unit” under the provisions of the Immovable Property Act (Tenure, Registration and Valuation), which does not constitute a “hotel” or “tourist accommodation” as defined in Part II and Part III of the same law;
which is rented as a mansion or a residence or a unit and not as a part of it, and
is registered in the Register of Self-Catering Accommodation under the provisions of Part IIIA” for the purposes of the law.
Violating the law can one be guilty of up to 1-year imprisonment and/or a fine not exceeding 5000 euros
It is prohibited to otherwise provide self-catering accommodation services unless the requirements are met. It is important to emphasize that any units being advertised on platforms such as Airbnb and Booking.com which have not been registered on the platform can be guilty of an offense carrying a sentence of up to 1 year imprisonment and/or a fine not exceeding 5000 euros.
A grace period?
Prior to the amendments being passed, any existing self-catering accommodation providers will have a grace period of 2 years to comply with the regulations.
Applying for offering self-catering accommodation services (Airbnb style) in Cyprus
Every property manager or owner who would like to offer self-catering accommodation services will have to submit an application in order to be added to the register. The application must contain characteristics and technical specifications of the unit as well as certifications that show it has been built as per the approved building plans with all necessary safety checks. Following application the Ministry of Tourism will examine each application within 2 months and if successful will grant a unique registration number.
Licenses are granted on a 3 year period basis at the end of which need to be renewed. The fee for application is based on the size and characteristics of the unit being offered. Under certain circumstances the license can be revoked under the discretion of the Ministry for various reasons. For example if the license was obtained under false pretenses, the business has ceased its operations or if the owner is convicted of a serious crime are all grounds for potential revocation of the license.
Registration with the tax department will be necessary and a tax number will have to be obtained for every unit. Income tax will be applicable on all income generated through the self-catering unit. If the service provider is a foreign tax resident, income tax will still be applied in Cyprus due to the fact that it is income generated in the country through immovable property. The only instance where this might not apply is if there are any Tax Treaties in place between the countries which can offer relief on taxation.
The Importance of Understanding the Amendments in Theory and Practice
The ongoing necessity of harmonization in regulations for a broader coverage into previously neglected aspects of business is clear. With the end of the 2 year grace period for existing self-catering accommodations from when the amendments of the regulations have been passed is fast approaching. This creates the need for owners and managers who provide self-catering accommodation to be well advised and understand how the rules apply to their dealings, in order to avoid any penalties in the future.
At A.G. Paphitis & Co. LLC one of our main objectives as an organization is to be constantly up to date with understanding in theory and in practice how new regulations come into effect. This allows us to advise our clients in the most effective way to achieve their goals without any misinformation.
For further information, please contact:
George Tashev, AGP Law Firm