Short-Term Leasing Of Self-Service / Self Catered Accommodation – Tax Authorities



The spread and wide use of digital platforms promoting the
short-term accommodation rentals of private properties around the
world demonstrated the existence of a gap in the legislation of the
Republic of Cyprus. The issues that arose in view of the gap in the
legislation for the commercial exploitation of private properties
for short leasing was addressed by the Government through the
passing of the Law on the Regulation of the establishment and
operation of Hotels and Tourist Accommodations in 2020 (Law
9(I)/2019), which amended the Law on the Regulation of the
establishment and operation of Hotels and Tourist Accommodations in
2019 (Law 34(I)/1969). On that basis, a major innovation was the
introduction of the notion of ‘self-service’ or
‘self-catered’ establishment, the meaning of which is
expressly distinguished from the notion of ‘hotels’ and
‘tourist accommodation’, as well as the establishment of a
Register designated to be used for the listing and licensing of the
‘self-service’ or ‘self-catered’ premises (the
“Register of Self-Service (Sharing Economy)
Establishments”), maintained and monitored by the Deputy
ministry of Tourism. In particular, according to the Law
34(I)/2019, a ‘self-service’ or ‘self-catered’
establishment may constitute an individual tourist furnished villa
or house or apartment, which is registered with the Register of
Self-Service (Sharing Economy) Establishments.

In particular, a ‘self-service’ or
‘self-catered’ establishment distinguishes in that the only
service provided is the provision of the premises on a short-term
basis for accommodation purposes. On the other hand,
‘hotels’ (including main hotel buildings, complexes of
small houses, traditional premises etc) and ‘tourist
establishments’ constitute premises within which other services
-beyond accommodation services- are provided as well (it is noted
that criteria apply on the categorization of an establishment as a
hotel or tourist establishment).

First and foremost, in order for an establishment to be eligible
to be registered with the Register of Self-Service (Sharing
Economy) Establishments for the purpose of being rented-out on a
short-term basis, it must bear the features and fulfil the
technical and operational standards for its classification in one
of the following classes of premises:

  • tourist furnished villas, being establishments
    that have -among others- independent and direct external access,
    privacy, autonomy of plot of land and construction, as well as a
    private garden (as designated).
  • tourist furnished houses, being furnished
    houses in a raw or in a complex that have -among others-
    operational autonomy, private, common or external access and
    privacy.
  • apartments, being individual units in a
    jointly-owned building which can property be occupied and exploited
    as a distinct and autonomous unit for residential purposes.

In any case, the areas, interior and exterior (including parking
space are), of each such ‘self-service’ or
‘self-catered’ establishment must have been constructed in
accordance to the respective planning and building permits as well
as to the applicable laws and regulations, while the interior areas
of each such establishment must consist of at least a living area
(separate or not), sleeping area (may be unified with the living
are in the case of studios), cooking area and a washroom (bath); in
this respect, it is noted that the maximum accommodation capacity
for each such house is 10 persons (in a 4/5 bedroom house) while
any house a having more than 3 bedrooms, must have a second
washroom (bath). Of course, the establishments, of any class, must
be connected to the utilities and have all appropriate
installations, including air-conditioning (cold – hot), water
supplying (cold – hot), drainage and electrical installation.
To this end, it goes without saying that the construction of the
establishment must be permanent and all necessary planning and/or
building permits, in accordance to the type and use of the
premises, must have been obtained.

Provided that an establishment fulfils the operational and
technical standards and specifications, as explained above, in
order for such an establishment to be registered with the Register
of Self-Service (Sharing Economy) Establishments, there is a series
of prerequisites:

  • the registered owner, the beneficiary, the owner of the unit or
    the (property) manager, as the case may be, be registered with the
    Tax Department for the purposes of Direct Taxation; to this end a
    declaration is made by the applicant at the time of filing of the
    application for the registration of a ‘self-service’ or
    ‘self-catered’ establishment with the Register of
    Self-Service (Sharing Economy) Establishments.
  • the registered owner, the beneficiary, the owner of the unit or
    the (property) manager, as the case may be, be registered with the
    Tax Department for the purposes of Indirect Taxation – VAT,
    provided that there is an obligation for registration in accordance
    to the relevant Law on Value Added Tax of 2000 (Law 95(I)/2000); if
    registered for VAT purposes, this must be declared at the time of
    filing of the application for the registration of a
    ‘self-service’ or ‘self-catered’ establishment with
    the Register of Self-Service (Sharing Economy) Establishments.
  • conclusion of insurance policy for the ‘self-service’
    or ‘self-catered’ establishment, against any risk, fire and
    civil liability.

In light of the aforesaid and in an effort to facilitate the
tracing of taxable commercial transactions and enhance transparency
for tax purposes, the European Directive 2021/514 (amending
Directive 2011/16/EU) on administrative cooperation in the field of
taxation (DAC7) of 22 March 2021, has been introduced (the “EU
Directive 2021/514”). The aim of the said EU Directive
2021/514 is to “impose a reporting obligation on (digital)
platform operators […] [who] are better placed to collect and
verify the necessary information on all sellers operating on and
making use of a specific digital platform
“, within the
scope of which (obligation) digital platforms carrying out activity
in the field of renting of immovable property also fall, either on
a domestic or cross-border level. Thus, it follows that digital
platforms operations ‘offering’ rental accommodation
options to consumers are under an obligation to declare to the tax
authorities the ‘private providers’ of such accommodations,
irrespective of the obligation of any such ‘private
provider’ (depending on the laws and regulations of his country
of tax residence) to declare the income derived from businesses
relating to the exploitation of, inter alia, ‘self-service’
or ‘self-catered’ establishments for short-term
leasing.

As a concluding remark, it appears that the criteria and
obligations introduced relating to the provision of
‘self-service’ or ‘self-catered’ accommodation
services aim to secure that the standards of this alternative type
of accommodation are of a satisfactory level, analogous to the
standards of traditional types of accommodation, giving the
consumers more options on choosing the accommodation type that
better suites their requests and needs.

private properties for short leasing was addressed by the
Government through the passing of the Law on the Regulation of the
establishment and operation of Hotels and Tourist Accommodations in
2020 (Law 9(I)/2019), which amended the Law on the Regulation of
the establishment and operation of Hotels and Tourist
Accommodations in 2019 (Law 34(I)/1969). On that basis, a major
innovation was the introduction of the notion of
‘self-service’ or ‘self-catered’ establishment, the
meaning of which is expressly distinguished from the notion of
‘hotels’ and ‘tourist accommodation’, as well as
the establishment of a Register designated to be used for the
listing and licensing of the ‘self-service’ or
‘self-catered’ premises (the “Register of Self-Service
(Sharing Economy) Establishments”), maintained and monitored
by the Deputy ministry of Tourism. In particular, according to the
Law 34(I)/2019, a ‘self-service’ or ‘self-catered’
establishment may constitute an individual tourist furnished villa
or house or apartment, which is registered with the Register of
Self-Service (Sharing Economy) Establishments.

In particular, a ‘self-service’ or
‘self-catered’ establishment distinguishes in that the only
service provided is the provision of the premises on a short-term
basis for accommodation purposes. On the other hand,
‘hotels’ (including main hotel buildings, complexes of
small houses, traditional premises etc) and ‘tourist
establishments’ constitute premises within which other services
-beyond accommodation services- are provided as well (it is noted
that criteria apply on the categorization of an establishment as a
hotel or tourist establishment).

First and foremost, in order for an establishment to be eligible
to be registered with the Register of Self-Service (Sharing
Economy) Establishments for the purpose of being rented-out on a
short-term basis, it must bear the features and fulfil the
technical and operational standards for its classification in one
of the following classes of premises:

  • tourist furnished villas, being establishments
    that have -among others- independent and direct external access,
    privacy, autonomy of plot of land and construction, as well as a
    private garden (as designated).
  • tourist furnished houses, being furnished
    houses in a raw or in a complex that have -among others-
    operational autonomy, private, common or external access and
    privacy.
  • apartments, being individual units in a
    jointly-owned building which can property be occupied and exploited
    as a distinct and autonomous unit for residential purposes.

In any case, the areas, interior and exterior (including parking
space are), of each such ‘self-service’ or
‘self-catered’ establishment must have been constructed in
accordance to the respective planning and building permits as well
as to the applicable laws and regulations, while the interior areas
of each such establishment must consist of at least a living area
(separate or not), sleeping area (may be unified with the living
are in the case of studios), cooking area and a washroom (bath); in
this respect, it is noted that the maximum accommodation capacity
for each such house is 10 persons (in a 4/5 bedroom house) while
any house a having more than 3 bedrooms, must have a second
washroom (bath). Of course, the establishments, of any class, must
be connected to the utilities and have all appropriate
installations, including air-conditioning (cold – hot), water
supplying (cold – hot), drainage and electrical installation.
To this end, it goes without saying that the construction of the
establishment must be permanent and all necessary planning and/or
building permits, in accordance to the type and use of the
premises, must have been obtained.

Provided that an establishment fulfils the operational and
technical standards and specifications, as explained above, in
order for such an establishment to be registered with the Register
of Self-Service (Sharing Economy) Establishments, there is a series
of prerequisites:

  • the registered owner, the beneficiary, the owner of the unit or
    the (property) manager, as the case may be, be registered with the
    Tax Department for the purposes of Direct Taxation; to this end a
    declaration is made by the applicant at the time of filing of the
    application for the registration of a ‘self-service’ or
    ‘self-catered’ establishment with the Register of
    Self-Service (Sharing Economy) Establishments.
  • the registered owner, the beneficiary, the owner of the unit or
    the (property) manager, as the case may be, be registered with the
    Tax Department for the purposes of Indirect Taxation – VAT,
    provided that there is an obligation for registration in accordance
    to the relevant Law on Value Added Tax of 2000 (Law 95(I)/2000); if
    registered for VAT purposes, this must be declared at the time of
    filing of the application for the registration of a
    ‘self-service’ or ‘self-catered’ establishment with
    the Register of Self-Service (Sharing Economy) Establishments.
  • conclusion of insurance policy for the ‘self-service’
    or ‘self-catered’ establishment, against any risk, fire and
    civil liability.

In light of the aforesaid and in an effort to facilitate the
tracing of taxable commercial transactions and enhance transparency
for tax purposes, the European Directive 2021/514 (amending
Directive 2011/16/EU) on administrative cooperation in the field of
taxation (DAC7) of 22 March 2021, has been introduced (the “EU
Directive 2021/514”). The aim of the said EU Directive
2021/514 is to “impose a reporting obligation on (digital)
platform operators […] [who] are better placed to collect and
verify the necessary information on all sellers operating on and
making use of a specific digital platform
“, within the
scope of which (obligation) digital platforms carrying out activity
in the field of renting of immovable property also fall, either on
a domestic or cross-border level. Thus, it follows that digital
platforms operations ‘offering’ rental accommodation
options to consumers are under an obligation to declare to the tax
authorities the ‘private providers’ of such accommodations,
irrespective of the obligation of any such ‘private
provider’ (depending on the laws and regulations of his country
of tax residence) to declare the income derived from businesses
relating to the exploitation of, inter alia, ‘self-service’
or ‘self-catered’ establishments for short-term
leasing.

As a concluding remark, it appears that the criteria and
obligations introduced relating to the provision of
‘self-service’ or ‘self-catered’ accommodation
services aim to secure that the standards of this alternative type
of accommodation are of a satisfactory level, analogous to the
standards of traditional types of accommodation, giving the
consumers more options on choosing the accommodation type that
better suites their requests and needs.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.