New Incentives Boost Affordable Housing Through Renovate and Rent Initiatives

Incentivizing Affordable Housing

The Cypriot Parliament recently reviewed two updated bills designed to encourage property owners to enter the “Renovate and Rent” program. Under these measures, rental income from affordable leases will be completely exempt from both income tax and the special defence contribution, provided that tenants meet the scheme’s income criteria.

Tax Relief and Capital Allowances

According to Rena Makri, Senior Audit Officer at the Ministry of Finance, landlords will benefit from rental income tax exemptions without losing out on capital allowances. Despite no tax levied on their rental income, they can still claim an increased allowance to offset other income taxes in the same year.

As clarified by State Aid Commissioner Stella Michailidou, the initiative does not constitute state aid since it is accessible to all interested parties.

Deductions Applied Regardless of Rental Exemptions

The Institute of Certified Public Accountants of Cyprus (ICPAC) praised the revision, highlighting that capital allowances stand unaffected by the new tax-free policy. This ensures property owners can still claim allowances even if their rental earnings are tax-exempt.

Officials also noted that, based on committee discussions, there appear to be no significant fiscal repercussions for combining the two tax exemptions. In fact, the Ministry of Finance estimates a yearly cost of €1.75 million (2024–2027) for corporate/income tax exemptions and an additional €100,000 annually over the same period for the special defence contribution exemption.

Commitment to Affordable Rentals

Property owners who receive renovation grants must legally commit to offering those renovated properties at affordable rates for six years. Eligibility is based on household income constraints: up to €25,000 for single tenants, €45,000 for couples or single-parent families, and a range of €50,000 to €65,000 for households of three to five members.

Applications are available through the Ministry of Interior’s website, the Cyprus Land Development Corporation (KOAG), and the “Affordable Housing” platform. KOAG then evaluates and connects successful applicants to their respective tax records.

Finding Investment Opportunities

This scheme could offer a valuable incentive if you’re considering renovating properties for rental income. Additionally, to explore more opportunities, take a look at Cheap Houses and Villas for Sale Cyprus. You can also discover prime listings in Nicosia to find properties suitable for this initiative.