Market stakeholders expect practical difficulties in the implementation of the new legislation requiring electronic payment of rents from 1 July, while at the same time expressing the view that it will strengthen transparency and reduce tax evasion.
As the Tax Department announced, under the new legislation introduced as part of the tax reform, the payment of rent for immovable property in Cyprus must be carried out exclusively through bank transfer, payment by debit or credit card, or any other recognised electronic means of payment.
The obligation applies to all natural and legal persons, regardless of the amount of rent and the type of use of the property. Payment of rent in cash is explicitly prohibited by law.
It is noted that the original proposal of the Ministry of Finance and the Tax Department provided for mandatory electronic payment only for rents exceeding €500.
Letter from property owners
The president of the Cyprus Property Owners Association, Kyprianos Theocharides, told Politis that there will be difficulties in practical implementation, especially for elderly people. “For this reason,” he noted, “we have requested that a special arrangement be made for those who demonstrably do not have the ability to comply with this new requirement.”
In a recent letter to the director of the Ministry of Finance, the Commissioner of Taxation, and the chairman and members of the House Finance Committee, the association set out its views and concerns regarding the new legislation.
The letter notes that strengthening transparency in financial transactions, more effective tackling of tax evasion, better documentation of payments and alignment with modern European practices are important and legitimate public policy objectives.
While the aim of creating a transparent and easily controllable payment system is understandable and legitimate, it is pointed out that, during the initial implementation of the legislation, certain practical issues may arise, which should be examined to ensure a smooth transition for all involved.
The association argues that practical solutions could be considered, such as:
- the introduction of a transition period before full implementation of the new provisions,
- the possibility of paying rent via cash deposit into the beneficiary’s bank account, provided that full recording of the transaction is ensured,
- the provision of special arrangements for elderly persons, individuals without a bank account and other vulnerable groups,
- the provision of clarifications or special arrangements regarding payment of the first rent instalment and deposit when signing a rental agreement.
“We believe that a gradual and smooth implementation of the legislation will substantially contribute to achieving its objectives, while ensuring that no citizen is faced with unjustified obstacles or exclusion due to their particular circumstances,” the letter states.
Transparency and additional revenue
The president of the Cyprus Association of Property Valuers, Polys Kourousidis, told Politis that “there will be some procedural issues at the beginning, but gradually people will become familiar with it and transparency will be achieved, which is very important for the property market.”
“There has always been a parallel rental market that was not beneficial for the economy. Many landlords do not declare their income, and some choose to rent to foreigners in order to receive untaxed income. With the new regulation, additional revenue for the state will arise,” he notes.
“At the beginning there will be problems in implementing the new regulation, mainly for elderly people, who usually received rent in cash, but gradually there will be normalisation. With the new arrangement, tax evasion is expected to decrease,” says Ask Wire CEO Pavlos Loizou.
“The digital reform may initially create practical difficulties, however over time, people will become accustomed and fully comply,” underlines Landbank Group CEO Andreas Christoforides. “It is important for everyone to understand that there are now structures and legislation that must be followed, and a culture of compliance with tax obligations must be established,” he stressed.
The Welfare Service for the Care and Rehabilitation of Displaced Persons of the Ministry of the Interior informed the public on Monday, particularly recipients and applicants for rent subsidy, about the new legislation regarding the method of rent payments.
For all new applications, as well as in cases of re-examination of existing beneficiaries, it is mandatory to submit the relevant electronic proof of payment. Handwritten receipts or simple acknowledgements of cash payments from landlords will not be accepted and will constitute grounds for rejection of the application and/or termination of the subsidy.
The new obligation is accompanied by penalties, which concern both landlords and tenants. The service urges all interested parties to proceed in a timely manner with the necessary arrangements with the owners of rented properties.
