Cyprus: VAT Regulation for Villas-to-Let Remain Unclear

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According to the Cyprus Directive, leasing out residential property is exempt from 19% VAT. However, if landlord carries out a business activity, he must pay 19% VAT.

This raises the following question: if the private house or apartment is rented out for the summer or from time to time, for example, through Airbnb, should the landlord pay VAT in this case? If this is true (the Cyprus tax authorities have not yet provided an official explanation), the number of rent payments will increase by 19%, which may reduce the demand for tourists to rent private houses in Cyprus in the future.

Needless to say, most transactions for renting temporary housing are made through the Internet and foreign specialized firms. At the same time, no one declares income, and potential taxpayers are not 100% sure, in which cases 19% of VAT is levied when renting private houses in Cyprus.

As it is known, an unclear settlement of the issue with the payment of VAT in the Directive is not grounds for exempting taxpayers from liability. Everyone is eagerly waiting for an official explanation of the Cyprus tax authorities on the application of the VAT Directive.