Concerns over massive loss of tax revenue and health and safety issues
By Bejay Browne
AN escalating problem of illegal holiday rental properties could be solved, if changes to current legislation allowed more homeowners to register properties, according to the secretary of the Paphos Hoteliers Association.
Euripides Loizides, also a board member of the Paphos regional board of tourism, told the Sunday Mail that although renting out domestic properties in Cyprus to tourists is illegal, changes to the law could encourage homeowners to register with the Cyprus Tourism Organisation (CTO), the responsible body for classification and administration of all tourist establishments.
“We want to bring more tourists in to Cyprus, so why not change the law and encourage those that want to rent legally, to sign up? They can pay an annual fee to the CTO and declare themselves to the government. It’s a chance to change, and help solve this phenomenon. It’s a global problem and its time that the government say ‘rent it out legally.’”
CTO tourist officer, Marios Tsianakas, said changes to the law may be possible, as they are preparing the new tourist strategy for the forthcoming year and are looking at ways of increasing visitor numbers.
“All of the legislation relating to this matter is under review. It is possible that the law could be modified so that the properties may become part of the accommodation product offered,” he said.
Current legislation states that all properties which are used to accommodate tourists must be declared as such by planning authorities and must secure a licence in advance and meet strict criteria. This covers all of the different categories, including traditional houses, apartments, villas and hotels, he said.
A licence is valid for two years and costs between 27 and 51 euros (for a villa with a pool).
For a villa to be considered and licensed by the CTO, it has to be on a plot of at least 1000m2 and have a swimming pool. But, that swimming pool – even though it is for a villa and probably rented out by just one family – must also have a lifeguard to supervise.
This alone is a perfect example of why the legislation is in need of an overhaul, and why homeowners are so tempted to rent their properties without a licence.
Tsianakas said that probably thousands of properties in Cyprus, of all types, are illegally rented out to holidaymakers on a regular basis, with homeowners making the most of the growing popularity of private holiday rental sites available on the internet.
“These properties are not allowed to accommodate tourists and cannot be let out legally.” He added that unlicensed properties can only be utilised for domestic use.
“First the owners have to secure the relevant permit from the planning authority. If approved the authority will make the change of use from domestic to tourist. There are many different types of categories in which properties fall into, we have around 200 registered as independent tourist villas. We realise that this is a very small percentage of this type of property which is being let out to tourists.”
That leaves thousands more unregistered and unregulated. Popular global holiday rental sites show thousands of possible private rental options available all over Cyprus, including studio flats, apartments, villas, luxury homes and traditional accommodation.
These renters are paying none of the taxes that should go to the government and the local authority.
Loizides said that illegal private rentals pose unfair competition to licensed accommodation as they carry out rentals in a ‘clandestine’ manner. He stressed that the dangers of unregulated renting also carry high risks in areas of health and safety.
Owners should have insurance in place and must also be ABTA and ATOL protected.
“The law is crystal clear on tourist renting. You must be licensed and comply with all of the regulations on renting to holidaymakers, including fire and health and safety,” he said. “This is the most important thing, imagine if there was a fire. In licensed accommodation, we have strict regulations. I don’t think that the authorities are enforcing the law enough.”
Loizides accepts such rentals happen all over the world.
“But it’s expensive for us and it’s not fair. It amounts to huge money in lost taxes. If you are renting something out, you are providing a service and you have to pay VAT. You are making a business, so you should pay local tax. Just because you are getting the cash in the UK doesn’t make it OK,”
Francis and Dai (real names withheld) bought their Paphos villa a number of years ago and were informed by their developer that it was illegal for them to rent out their home as holiday vacation property.
“Until we retired to Cyprus a few years ago, we just used it for holidays, as we understood that we couldn’t make an income from renting it out,” said Frances. “Four years ago, a neighbour started renting out their house out to tourists for holidays on one of the rental sites, and it’s been a nightmare ever since.”
The couple said that the house – which is substantial – is full almost all year round with large parties of visitors, up to twelve at a time, obliterating the peace of an otherwise quiet area. Dai said that other neighbours were also unhappy, but that the property owner couldn’t care less.
“One of the reasons we bought here was the quiet residential neighbourhood. We can’t even use our garden during the summer as noise levels can get extreme. We have had to call the police on a number of occasions, but as most of the visitors are youngsters, they have little respect and it gets noisy again once the patrol car has pulled off.”
Tsianakas said that such instances should be reported and that CTO inspectors often need help to secure a prosecution
The pair may take some comfort in the knowledge that a number of successful prosecutions have been brought by the CTO in recent years, although Tsianakas said he didn’t know actual figures.
“We have inspectors that collect all of the relevant evidence and then we will bring a case before the court. Ideally, we need a person to testify, then we have a concrete case,” he said.
However, in many instances, people don’t want to give a statement and testify, he said. It’s also down to timing, he added, as inspectors have to try and ensure that tourists are in the property when they visit. “Sometimes this is hard, which is why we need the help.”
The tourist officer said that the CTO usually wins cases, and on conviction the penalty is a 512 euro fine and/or up to six months in prison.
On conviction, a court order will be issued to cease the operation immediately. If it continues, a 25-euro daily penalty will ensue and perpetrators could face prison. The court order is very strict, he said.
“It’s hard as we are only a small team of 30 people and all of the licensed properties in Cyprus are in our remit. “
This includes 800 licensed hotels, 3,500 catering and entertainment establishments, 300 travel agencies, tourist guides and beach inspections.
Many of the properties being offered for holiday rental are British owned and are being rented out to British tourists.
Undeclared income may also result in hefty fines, warned Nick Cairns of Blevins Franks, leading advisors in international tax and wealth management to UK nationals living in Europe.
“Always be transparent and declare your income. Our clients always declare any rental income on their tax returns.”
Loizides added that changes to the law are a necessary way to curb the illegalities and help solve the ongoing problem.