The spread of the COVID-19 virus and its proclamation as a pandemic by the World Health Organization has brought us to the threshold of unprecedented situations with huge changes in our personal and professional lives.
Governments worldwide have been directed to take measures to combat it, while the economy, businesses and society have been unimaginably affected.
One of the burning issues that concerned government and the community was the situation regarding the payment of rents in Cyprus. Amendments to the relevant legislation were made to help both tenants and homeowners.
The bill gives an incentive to homeowners to reduce rent by providing income tax credit of up to 50% for the 2020 tax year.
The new rental bill granted a tax credit (reduction) in cases where the owner of the property makes a voluntary reduction of the rent for a period of up to three months, in 2020 and which is equal to 50% of the rent reduction if the following conditions are met:
A shop owner who rents his premises to a specific Ltd Company with a monthly rent of €1,000, wishes to help the company in the midst of the pandemic. Taking into account the tax incentive of the tax credit, the landlord reduces rents for a period of three months - for example from May to July 2020 by 50%.
Therefore, the owner will collect three months' rent taking the amount of €1,500 instead of rents of €3,000 and the tax credit he will have will be in the order of 50% of the total reduction, thus at €750.
If the owner has income other than the rents receivable, when calculating the income tax for the landlord, the amount of tax deriving from his total income is €2,000.
Therefore, the owner will be asked to pay a final tax amount of €1,250, after deducting from the income tax payable (€2,000), the tax credit from the rent reduction (€750).
In order to be able to apply the above amendment, the landlord and tenant cannot be related persons as defined in Article 33 of the Income Tax Act.
With the adoption of the Rental (Temporary Provisions) Law of 2020, due to the adoption from 24 March 2020 of restrictive measures on the movement of citizens, temporary measures were taken to protect tenants from the possibility of eviction as a result of the situation. Therefore, until September 2020 there is no right of eviction by the landlord on the tenant.
It should be noted that protective provisions do not apply where any rent legally due had not been paid until 29 February 2020.
In conclusion, a number of measures have been taken, but they concern only those cases which fall within the scope of the application of the rent and apply only where no rents payable before 29 February 2020 are outstanding.
The measures do not apply to rents from properties which have been erected since the year 2000, therefore in any other lease agreement (rental) the Rental (Temporary Provisions) Law of 2020 does not apply, but instead the Contracts Act, Cap. 149 applies.
At this stage, no measure has been taken concerning rental contracts under the Contracts Act.
The content of this article is intended to provide a general guide to the subject matter and does not constitute legal advice. For more information on the above topic, please contact the offices of Michael Kyprianou & Co LLC at 26 930800 and by email at firstname.lastname@example.org