The revised texts of two bills aimed at increasing the supply of affordable housing through incentives for property owners participating in the “Renovate and Rent” scheme were presented yesterday before the Parliamentary Finance Committee.
Speaking before the committee, Rena Makri, Senior Audit Officer at the Ministry of Finance, stated that following consultations with relevant stakeholders and services, the revised bills clarify that income from affordable rentals will be exempt from income tax and the special defence contribution for the entire period the property is rented to tenants meeting the scheme’s income criteria.
She further explained that despite the rental income tax exemption, taxpayers will still be eligible to claim increased capital allowances against other income within the same tax year.
State Aid Commissioner Stella Michailidou informed the committee that, following prior consultations, her office maintains its position that the scheme does not fall under state aid regulations, as it is open to all.
Deductions regardless of tax exemptions on rental income
A representative of the Institute of Certified Public Accountants of Cyprus (ICPAC) noted that the amendments address their concerns regarding capital allowances, which will be granted irrespective of the rental income tax exemptions.
In response to a question from AKEL MP Andreas Kavkalias regarding the potential fiscal impact of implementing both tax exemptions, Ms. Makri assured that no such issue was raised during discussions.
It is recalled that, under the provisions of the first bill submitted to Parliament, property owners will be exempt from corporate tax or income tax on rental income from properties participating in the “Renovate and Rent” scheme.
Additionally, they will be entitled to claim increased capital allowances – rising from 3% to 5% for buildings and from 10% to 15% for machinery and equipment.
These benefits will apply during the implementation of the Ministry of Interior’s “Renovate and Rent” scheme, with the estimated fiscal impact for 2024-2027 projected at €1.75 million per year.
Regarding the second bill, the estimated fiscal impact of exempting rental income from the special defence contribution is projected at €100,000 annually for 2024-2027.
When asked how it would be ensured that properties receiving renovation grants will be rented out at affordable rates, a Ministry of Finance official clarified that property owners benefiting from the renovation incentive must legally commit to offering the property for six years to eligible tenants under the scheme.
Eligible tenants and application process
Eligible tenants must meet specific income criteria based on family status. For example:
- Single individuals: annual income up to €25,000
- Couples or single-parent families: annual income up to €45,000
- Families with three to five members: income limits ranging from €50,000 to €65,000
Interested property owners and tenants can submit their applications online via the Ministry of Interior’s website, the Cyprus Land Development Corporation (KOAG), and the “Affordable Housing” platform. Applications will be evaluated by KOAG, with approved applications linked to the beneficiaries’ tax records.
