Officials from the tax department are set to crack down on homeowners who benefit from VAT reductions while renting out their property through AirBnB and Booking.com, it emerged on Thursday.

The coming crackdown comes amidst reports that many homeowners listed their properties as a primary residence to receive the reduced VAT rate of 5 per cent.

This issue emerged after it was found that these houses were instead being used as properties for rent through AirBnB and booking.com.

Under the legislation, purchasers of properties who benefit from the 5 per cent and use them for commercial purposes must pay to the tax department the normal VAT rate, which is 19 per cent.

Due to the upcoming summer holidays, it is expected that the number of tourists coming to the island and choosing to stay in these establishments will increase, leading the tax department to organise a new campaign to identify those who have violated the law.

Dozens of department officers will go to areas with rented houses or apartments to determine whether they are occupied by the buyer who benefited from the reduced VAT or by visitors who are renting.

As previous inspections have shown, there are too many instances of properties being rented out rather than used as main residences, particularly on the coast.

Tax Commissioner Sotiris Markides has called on buyers who received reduced VAT rates and who now commercially exploit the properties, to comply with the law and pay the amounts they owe to the state.

Speaking to Philenews, he said it would be better for the owners of such properties to voluntarily go to the tax department to pay the remaining 14 per cent VAT so that tourists are not disturbed during the officials’ inspections.

“We urge those who got the 5 per cent VAT without being entitled to it, to come to the department to settle their debt,” he said.

It’s understood that homeowners who do not on their own come forward to settle the VAT difference will face an additional financial penalty down the line.

Markides explained that the campaign will involve many officials of the department, with the aim of checking – if possible- the properties one by one. At the same time, he noted that they will also carry out checks on the websites of these platforms to confirm the renting of premises or to identify such cases.

“We urge people to comply with the law to avoid interest and charges,” he indicated.

Markides added that instructions were also given to the district offices of the department to accept payment in instalments for the additional VAT that property owners will have to pay.

Specifically, taxpayers will be able to pay their debts through 12 equal monthly instalments. The tax commissioner has the right to approve an extension of the number of instalments.

This is the second drive conducted by the department to recover the additional VAT. During the previous campaign, department officials carried out 3,000 on-site inspections of residential properties, identifying 500 homeowners who had abused the reduced VAT. In addition, another 500 taxpayers, after being informed of the campaign, voluntarily went to the department and paid the remaining 14 per cent VAT they owed to the state.

During that drive, the department’s coffers received almost €40 million.