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Extension of Tax Incentives for Reduced Rent

Extension of Tax Incentives for Reduced Rent

The tax incentives provided to landlords for the voluntary reduction of rent charged to tenants – companies whose activities have been suspended due to the COVID-19 pandemic have been extended for the 2021 tax year.

The Tax Law, along with the Special Defence Contribution Law, have been amended and clarify that qualifying landlords can claim a tax credit equal to 50% of the rent reduction voluntarily agreed and implemented between the landlord and the tenant provided that the said reduction does not fall below 30% of the monthly rental amount.

Conditions:

  • The relief provided for the rent decrease applies for a period of no more than 3 months and falls within the period from 01/01/2021 until 30 /06/2021, regardless of the months in which the rent reduction is valid;
  • No tax credit is permissible for rental reduction that surpasses 50% of the monthly rental amount;
  • The landlord and the tenant form a written agreement that regulates the terms of the rental reduction;
  • The landlord and the tenant must not be related;
  • the tax credit can be used for the total tax allocated for the tax year 2021;
  • Any tax refund cannot exceed the amount of tax already paid.

Special Defence Contribution (SDC):

Special Defence Contribution is an additional method where qualifying landlords can claim an exemption. This however applies provided that the rental reduction is not below 30% of the monthly rent and the following conditions:

  • The exemption from SDC is applies for no more than 3 months, starting from 01/01/2021 until 30/06/2021, regardless of the approved months of such reduction.
  • The landlord and the tenant form a written agreement that regulates the terms of the rental reduction;
  • The landlord and the tenant must not be related

For any further guidance regarding this procedure or if you require an initial consultation, please do not hesitate to contact our Law Firm at info@vrikislegal.com, +357 22 251 777 or +357 25 261 777 or please visit our office in Nicosia or Limassol.