On Friday January 17, the House of Representatives passed a new law, N. 9(I)/2020 (also “the Law”), regulating the registration and operation of self-catering accommodation, which was subsequently published in the government’s Official Gazette on February 7, 2020.
The Law is directed at operators currently utilising online platforms such as Airbnb and Booking.com and it was passed by an overwhelming majority of 52 MPs in favour and two MPs against. Under its provisions, owners of self-catering accommodation will now have to follow a set of regulations and formalities in order to legally provide their services.
Arguably, the purpose of the newly enacted law was to regulate what has been, up to now, a profoundly uncontrolled area of business in Cyprus. Its provisions allow for the establishment of a platform which will assist authorities in imposing appropriate controls and taxation on self-catering accommodation. This platform will come in the form of a ‘Register of Self-Catering Accommodations’ which will be kept by the Deputy Ministry of Tourism.
N.9(I)/2020 is an amending law to the current ‘Law on the Regulation of Establishment and Operation of Hotels and Tourist Accommodations of 2019 (N. 34(I)/2019)’. As per N. 9(I)/2020, the two laws will, from now on, be read and referred to concurrently as the ‘Laws on the Regulation of Establishment and Operation of Hotels and Tourist Accommodations of 2019 and 2020’.
A key to comprehending the essence of the Law lies with the meaning of the term ‘self-catering accommodation’. This has been defined by the Law 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 (Tenure, Registration and Valuation) Act, 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.”
What is important, however, is that at its core, N. 9(I)/2020 brings about a number of changes which owners or administrators of self-catering accommodation need to follow to ensure their services are provided legally. More specifically, the renting of self-catering accommodation is from now on prohibited, unless certain conditions are met.
These conditions are exhaustively listed in Part IIIA of the Law which maintains that:
The self-catering accommodation bears the features and specifications of a single residence and/or a single tourist furnished mansion and/or single apartment, as these are defined by the Law.
The self-catering accommodation is registered in the Register of Self-Catering Accommodations.
The self-catering accommodation maintains at the time of operation a valid and renewed registration license.
Furthermore, the Law requires that the owners and/or rightful users of self-catering accommodation will have to complete and submit an application for the registration of their self-catering accommodation to the Deputy Ministry of Tourism.
It should be noted that the application carries a fee which will vary according to the type of the self-catering accommodation. The Law has not disclosed the differing fee levels that will be applied.
A submitted application must contain all the relevant details and characteristics of the unit, such as its technical specifications, and, evidence that it has been built as per the building permit and planning permission issued by the appropriate authorities. The submitted application must also be accompanied by documentation proving that the self-catering unit has been registered with the Tax Department and has received either a Tax ID or a VAT no., depending on which is applicable.
Although N. 9(I)/2020 does not make specific references to taxation matters, once registered with the Tax Department, the provisions of the Income Tax Law should apply, in that the unit owner will have to declare any income derived from the unit and pay any tax liability arising from the income. Where, the owner of the unit is not a Cyprus tax resident, income tax will be payable in Cyprus, as it will be considered as tax arising from income from immovable property and/or business. Proof must also be provided that the unit is insured against any danger including fire and public liability.
The Deputy Ministry of Tourism shall examine each application within 2 (two) months from the date of submission of the application and upon a successful application, each self-catering accommodation will be provided with a registration number and a licence.
It is important to emphasise that the registration number of each unit will need to be publicised on every advert and/or any form of marketing of the self-catering accommodation (i.e. platforms such as Airbnb and/or Booking.com), as well as in all relevant transactions. As per the amended article 22 of the Law, whoever advertises or operates a self-catering accommodation without the appropriate number and licence registration in place, may be guilty of an offence which could carry a prison sentence of up to one (1) year and/or a fine not exceeding five thousand euros (€5,000).
The registration licence will not be issued for an indefinite period of time. It shall be valid for 3 (three) years only and upon its expiry the owner will need to apply for its renewal. Furthermore, in certain circumstances, it may be revoked subject to the Deputy Ministry of Tourism’s discretion. These circumstances include, amongst others, where the licence has been approved based on false or misleading facts, there has been a cessation of operation of the business operating the self-catering accommodation, or where the owner/operator has been convicted of a serious offence (such as: murder, burglary, theft, fraud, forgery etc. thus creating a significant infraction of the owner/operators’ clean criminal record).
Bolstering the authority of the Deputy Ministry of Tourism is the fact that, under the Law, it will now be entitled, of its own volition, to carry out inspections of self-catering accommodations. It will be entitled to check whether a self-catering accommodation has a valid registration licence and, where it does, to also check whether the licence terms are being honoured by the owner/operator of the accommodation.
Finally, it should be noted that, any persons operating self-catering accommodations prior to the enactment of the Law, will have a grace-period of 2 (two) years to conform with the new Law and regulations. New owners, however, who wish to rent out their properties will have to register their units immediately. Failure to conform with the Law after the expiry of the grace-period, will constitute an offence and the advertising and/or providing of services of self-catering accommodations in Cyprus without a registration license is now illegal.
Christiana Georgiou, lawyer in the Real Estate department of Elias Neocleous & Co LLC