Legal Framework and Regulations Governing Airbnb and Short-Term Rentals in Cyprus

The rise of short-term rental platforms like Airbnb has transformed the tourism and property sectors in Cyprus, offering property owners new revenue streams while presenting regulatory challenges. To balance economic opportunities with consumer protection, public safety, and fair market practices, Cyprus has established a robust legal framework to govern short-term rentals. This article provides an in-depth exploration of the legal obligations, registration processes, taxation policies, operational standards, and enforcement mechanisms that property owners must navigate to operate short-term rentals legally in the Republic of Cyprus.

1. Legislative Background

The cornerstone of short-term rental regulation in Cyprus is the Regulation of the Establishment and Operation of Hotels and Tourist Accommodation Law [Law 34(I)/2019], as amended by Law 9(I)/2020. This legislation was introduced to formalise the operation of self-catering accommodations, which include properties listed on platforms like Airbnb. The law addresses the rapid growth of short-term rentals, ensuring they meet safety, quality, and fiscal standards while contributing to the tourism sector’s integrity.

Key objectives of the legislation include:

  • Standardisation: Establishing clear criteria for the classification and operation of self-catering accommodations.
  • Consumer Protection: Ensuring guests receive safe, high-quality accommodations.
  • Revenue Tracking: Facilitating tax compliance and preventing undeclared income.
  • Market Fairness: Levelling the playing field between short-term rentals and traditional hospitality businesses, such as hotels.

The Deputy Ministry of Tourism oversees the implementation of this framework, with authority to register properties, conduct inspections, and enforce compliance. Recent amendments reflect Cyprus’s alignment with broader European Union (EU) directives aimed at regulating the sharing economy.

2. Definition of Self-Catering Accommodation

Under Cypriot law, self-catering accommodations are defined as fully furnished properties rented out in their entirety for short-term stays, typically to tourists. These accommodations include:

  • Tourist Villas: Standalone properties with private amenities, such as pools or gardens.
  • Furnished Residences: Houses or townhouses equipped for self-catering.
  • Apartments: Individual units within multi-unit buildings.

Key Characteristics:

  • Properties must be rented as a single unit, not as separate rooms or shared spaces (e.g., no “room rentals” within a host’s home qualify under this category).
  • They are distinct from hotels, guesthouses, or other regulated hospitality establishments.
  • They must meet specific standards for furnishings, safety, and guest amenities.

This definition excludes properties used for long-term leasing or those lacking the necessary permits for tourist use. The distinction ensures that short-term rentals operate as professional tourism offerings rather than informal arrangements.

3. Registration Requirements

To operate a short-term rental legally in Cyprus, property owners must register their accommodations with the Deputy Ministry of Tourism. The registration process is rigorous, designed to ensure compliance with safety, zoning, and fiscal regulations. Below is a detailed breakdown of the requirements:

Application Submission

  • Owners must complete a designated application form available through the Deputy Ministry of Tourism’s online portal or offices.
  • An affidavit is required, affirming that the property complies with all legal and operational conditions, including zoning laws and safety standards.

Supporting Documentation

Applicants must provide:

  • Valid Building or Town Planning Permit: Confirms the property is legally constructed and zoned for residential or tourist use.
  • Tax Identification Number (TIN) or VAT Number: Verifies registration with the Cyprus Tax Department.
  • Insurance Coverage:
    • Fire Insurance: Covers property damage due to fire.
    • Public Liability Insurance: Protects against claims arising from guest injuries or damages (minimum coverage typically €500,000).
  • Recent Utility Bill: Issued by the Cyprus Electricity Authority (EAC) to confirm the property’s address and operational status.
  • Identification Documents:
    • For individuals: Copy of a passport or Cyprus ID.
    • For legal entities: Certificate of incorporation, details of directors, and registered office address.

Registration Fee

  • A non-refundable fee of €222 per property is required.
  • Registration is valid for three years, after which owners must renew, submitting updated documentation and paying the fee again.

Registration Outcome

  • Upon approval, the property is assigned a unique registration number.
  • This number must be displayed prominently in all advertisements, including online listings on platforms like Airbnb, Booking.com, or Vrbo.
  • Failure to display the registration number can result in fines or removal of listings by platforms.

Practical Considerations:

  • The registration process can take several weeks, depending on the completeness of the application and the Deputy Ministry’s workload.
  • Owners are encouraged to consult legal or real estate professionals to ensure all permits and documents are in order before applying.

4. Operational Standards and Compliance

Registered short-term rentals must adhere to strict operational standards to ensure guest safety, property quality, and regulatory compliance. These standards are enforced through inspections and guest feedback mechanisms. Key requirements include:

Safety Measures

  • Fire Safety:
    • Installation of fire extinguishers (minimum one per floor, serviced annually).
    • Provision of fire blankets in kitchens.
    • Clear signage indicating fire exits and evacuation routes (for multi-unit buildings).
  • First Aid:
    • Availability of a first aid kit with basic supplies (e.g., bandages, antiseptics).
  • Emergency Information:
    • Display of emergency contact numbers (e.g., police, fire, ambulance, property manager).
    • Posting of the property address in a visible location to assist emergency responders.

Guest Management

  • Rental Agreements:
    • Owners must provide written agreements outlining rental terms, check-in/check-out procedures, and house rules.
    • Agreements should specify cancellation policies, damage deposits, and liability clauses.
  • Guest Records:
    • Owners must maintain records of guest details, including names, contact information, and dates of stay, for at least one year.
    • These records may be requested during inspections to verify compliance.

Property Standards

  • Properties must be fully furnished, equipped with functional appliances, and maintained in good condition.
  • Regular cleaning and maintenance are required to meet hygiene and quality expectations.

Insurance

  • Owners must maintain valid insurance policies covering:
    • Fire and Natural Disasters: To protect the property.
    • Public Liability: To cover guest-related claims.
  • Proof of insurance must be available for inspection.

Non-Compliance Penalties:

  • Failure to meet operational standards can result in:
    • Fines up to €5,000 per violation.
    • Imprisonment for up to one year in cases of severe or repeated violations.
    • Suspension or revocation of the registration licence, prohibiting further rentals.

5. Taxation and VAT Obligations

Income from short-term rentals is subject to Cyprus’s taxation regime, with specific obligations depending on the owner’s income level and business structure. Proper tax compliance is critical to avoid penalties and audits. Key considerations include:

Income Tax

  • Threshold: Individuals earning over €19,500 annually from all sources (including rental income) are subject to income tax.
  • Progressive Rates:
    • 20% for income between €19,501–€28,000.
    • 25% for income between €28,001–€36,300.
    • 30% for income between €36,301–€60,000.
    • 35% for income above €60,000.
  • Owners must file annual tax returns with the Cyprus Tax Department, declaring rental income.

Special Defence Contribution (SDC)

  • A 3% SDC is levied on rental income for tax residents domiciled in Cyprus.
  • Non-residents are exempt from SDC but remain subject to income tax on Cyprus-sourced income.

Value Added Tax (VAT)

  • Threshold: Owners with an annual turnover exceeding €15,600 from short-term rentals must register for VAT.
  • Rate: Short-term rentals of residential properties used for holiday or tourist accommodation are subject to a reduced VAT rate of 9%. This applies when the property is rented out directly by the owner to the end user (e.g., guests via platforms like Airbnb or Booking.com) and meets the criteria for holiday accommodation, such as being furnished, including utilities, and providing services like linen and cleaning
  • Owners can deduct input VAT on related expenses (e.g., property maintenance, utilities) if properly documented.
  • Exemptions may apply for small-scale operators below the threshold, but registration is still required for monitoring purposes.

Practical Tips

  • Owners should maintain detailed records of income and expenses to simplify tax filings.
  • Engaging a tax professional is highly recommended to navigate complex VAT rules, optimise deductions, and ensure compliance with filing deadlines.
  • Failure to declare income or register for VAT can result in fines, interest on unpaid taxes, and legal action.

6. Enforcement and Penalties

The Deputy Ministry of Tourism is responsible for enforcing compliance through:

  • Random Inspections: To verify adherence to safety, registration, and operational standards.
  • Guest Complaints: Investigations triggered by reports of substandard accommodations or unregistered properties.
  • Platform Monitoring: Collaboration with platforms like Airbnb to ensure listings display valid registration numbers.

Penalties for Non-Compliance:

  • Fines: Up to €5,000 for violations such as operating without registration, failing to meet safety standards, or undeclared income.
  • Imprisonment: Up to one year for serious breaches, particularly those endangering guest safety.
  • Licence Revocation: Loss of the registration licence, prohibiting further short-term rental operations.
  • Platform Delisting: Platforms are required to remove listings without valid registration numbers, reducing visibility and revenue.

Platform Responsibilities:

  • Airbnb and similar platforms must verify registration numbers and report non-compliant listings to the Deputy Ministry.
  • Platforms may face penalties for failing to enforce compliance, incentivising stricter oversight.

7. Recent Developments and EU Regulations

The short-term rental sector in Cyprus is subject to ongoing regulatory evolution, driven by local needs and EU-wide initiatives. Key developments as of May 2025 include:

  • Proposed Caps Rejected: In March 2025, the Attorney-General’s office rejected proposals to limit the number of properties an individual or company could register for short-term rentals. The decision was based on concerns over market restrictions and economic impact, but discussions continue to address housing shortages and over-tourism.
  • EU Directives: Cyprus is aligning with EU Regulation 2024/1028 (effective November 2024), which mandates:
    • Enhanced data sharing between platforms and authorities to track rental activity.
    • Stricter transparency requirements for listings, including clear disclosure of registration status and host identity.
    • Measures to combat illegal listings and ensure tax compliance across member states.
  • Local Debates: Stakeholders, including hotel associations and property owners, are advocating for balanced regulations to prevent short-term rentals from exacerbating housing shortages in urban areas like Limassol and Paphos.

These developments underscore the need for property owners to stay informed about regulatory changes, as non-compliance with new EU or local rules could result in additional penalties.

8. Practical Considerations for Property Owners

Operating a short-term rental in Cyprus requires careful planning and ongoing diligence. Below are practical tips to ensure compliance and success:

  • Legal and Tax Advice: Engage professionals to navigate registration, taxation, and compliance requirements, especially for VAT and insurance obligations.
  • Documentation: Maintain organised records of permits, insurance policies, guest details, and financial transactions for inspections and tax filings.
  • Platform Compliance: Ensure all listings display the registration number and comply with platform policies to avoid delisting.
  • Guest Experience: Invest in quality furnishings, clear communication, and prompt maintenance to meet guest expectations and maintain positive reviews.
  • Stay Updated: Monitor announcements from the Deputy Ministry of Tourism and EU regulatory bodies for changes to short-term rental rules.

Conclusion

The legal framework governing Airbnb and short-term rentals in Cyprus is designed to promote a safe, transparent, and sustainable tourism sector. Property owners face stringent requirements, including registration with the Deputy Ministry of Tourism, adherence to safety and operational standards, and compliance with tax obligations. Non-compliance carries significant penalties, from fines and imprisonment to licence revocation and platform delisting.

At Chambers & Co, we provide comprehensive legal support to property owners, investors, and platform operators, ensuring that their operations align with the regulatory framework established by Cypriot and EU law. Our services include property licensing, tax structuring, contract drafting, regulatory compliance, and ongoing legal consultancy tailored to the tourism and real estate sectors. With decades of experience advising local and international clients, our law firm remains a trusted legal partner for those seeking to establish, manage, or optimise short-term rental ventures in Cyprus. For professional legal assistance regarding Airbnb regulations or any real estate and investment matters, contact Chambers & Co – your dedicated law firm in Cyprus.