Understanding Airbnb activity from a tax perspective
Many property owners in Cyprus rent out their properties through online platforms such as Airbnb, Booking.com, or similar short-term rental platforms. While this activity may appear similar to traditional rental income, Cyprus tax law treats short-term accommodation differently.
From a tax and accounting perspective, income from short-term rentals is treated as business income rather than passive rental income. This distinction has important consequences for both direct and indirect taxes (income tax and VAT).
When Airbnb income is treated as a business activity
Under Cyprus tax guidance, income earned from self-service accommodation provided through online platforms is classified as income from the right of use of space. As a result:
- It is liable to income tax on the taxable income.
- It is not subject to the Special Defence Contribution (SDC).
- It is subject to GESY contributions on the taxable income.
- It may be subject to VAT on the rental price, provided that there is an obligation for VAT registration or the owner chooses to register voluntarily.
This classification applies whether the owner considers themselves a professional host or rents out only one property.
Income tax on Airbnb earnings
Airbnb owners are taxed on net taxable income, not on gross receipts. Taxable income is calculated as:
Gross income, less:
- Platform or operator commissions
- Allowable operating expenses incurred wholly and exclusively for the activity
- Capital allowances on the building
- Loan interest relating to the acquisition of the property
The resulting net income is taxed under the personal income tax bands, which apply progressively once total taxable income (from all sources) exceeds €22,000.
Allowable expenses and capital allowances
Proper accounting records are essential to ensure that all allowable deductions are claimed correctly.
Common deductible expenses include:
- Repairs and maintenance
- Utilities such as electricity and water
- Cleaning and management costs
- Insurance related to the property
- Interest on property acquisition loans
In addition, capital allowances may be claimed on the cost of the building at a rate of 3% per annum, excluding the value of the land.
Incorrect or incomplete expense tracking often results in higher tax liabilities than necessary.
GHS (GeSY) contributions on Airbnb income
Income from short-term accommodation is also subject to GHS contributions at 2.65% on net taxable income.
GHS applies:
- To Cyprus tax residents
- To non-residents earning income from immovable property located in Cyprus
GHS contributions are tax-deductible for income tax purposes, but they must be calculated and paid correctly to avoid penalties.
VAT Obligations for Short-Term Rental
VAT is one of the most common areas of non-compliance for Airbnb owners.
VAT registration becomes mandatory:
- at the end of any month, if the value of taxable supplies during the one year ending at that point has exceeded € 15,600.
- at any time if there are good reasons to believe that the value of taxable supplies during the thirty days beginning at that time, exceeds € 15,600.
Once registered:
- VAT must be charged on the rental price
- The applicable VAT rate for holiday accommodation currently applies
- VAT returns must be submitted quarterly
- VAT collected must be paid to the Tax Department on time
It is the property owner’s responsibility, not the platform’s, to assess VAT obligations and ensure compliance.
Declaring Airbnb income on the tax return
Airbnb income must be declared in the individual income tax return (T.D.1).
In cases of jointly owned property:
- Each co-owner must declare their respective share of the income
- Each co-owner is responsible for their own tax and GHS obligations
Failure to correctly declare income may result in assessments, penalties, and interest.
Common accounting and tax mistakes we see
Based on our experience advising Airbnb property owners, frequent issues include:
- Treating Airbnb income as passive rental income
- Failing to register for VAT on time
- Not claiming allowable expenses or capital allowances
- Incorrect GHS calculations
- Poor record-keeping and lack of supporting documentation
Early professional guidance helps avoid costly corrections later.
How Michael Chambers & Co. LLC supports Airbnb owners
Michael Chambers & Co. LLC provides end-to-end accounting and tax support for Airbnb and short-term rental property owners.
Our services include:
- Tax classification and compliance review
- Income tax and GHS calculations
- VAT registration and quarterly filings
- Expense review and capital allowance calculations
- Preparation and submission of personal tax returns
- Ongoing accounting and advisory support
We work closely with property owners to ensure clarity, compliance, and efficient tax outcomes.
Seeking professional guidance
Tax obligations for Airbnb owners in Cyprus are more complex than many expect. Treating short-term rental income correctly from the outset helps avoid penalties and ensures accurate tax liabilities are calculated.
For tailored accounting and tax advice relating to Airbnb or short-term rental income, contact our Accounting team for guidance based on your specific situation.
