VAT TAX IMPOSED ON LAND PURCHASE BY CYPRUS GOVERNMENT – 2022
VAT imposition on land transactions has been imposed by an amendment to the legislation relating to VAT has been voted into law on the 3rd of November 2017 by the House of Representatives. More precisely this is about the imposition of VAT at 19% on land transactions for business purposes. This legislation will affect the real estate industry negatively in an already sour environment. Foreign investors will not be encouraged either. Real estate is already burdened with may other taxes.
VAT imposition on land transactions – May 2022
The Law specifically provides for VAT to be charged on the following transactions:
- The transfer of undeveloped buildable land which is intended for the construction of one or more fixed structures in the course of the economic activities of the transferor.
- The leasing and/or letting of immovable property to a taxable person for the purposes of making taxable activities except for the leasing of a building used for private dwellings.
- The lessor has the right to choose not to tax the above transaction under certain conditions provided that he/she notifies the Tax Commissioner accordingly.
Moreover, it is provided by the Law that VAT must be accounted for in relation to transactions involving the transfer of buildings (before the first occupation) and land from the borrower to the lender under a loan reorganization or forced transfer procedure. In such cases, the recipient of the property is required to account for VAT under the reverse charge provisions provided that he is a taxable person and the property is received and used for business purposes.
When does this come into effect?
The Law comes into effect as from the 2nd of January 2018 except for the provisions regarding the leasing and/or renting of immovable property which comes into effect from the date the Law is published in the official Gazette of the Republic.
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