Cyprus VAT Law was recently amended in order to bring the legislation in line with the relevant EU Law. It should be noted that this amendment should be made long time ago in order to harmonize local Law with European Legal Regime. The new provisions are in full force as from the beginning of 2018.
One significant change is that the Law now imposes VAT (19%) on sales/tranfers of building land or a share in building land which is intended for construction of building or buildings within the framework of a business activity.
In addition the leasing of immovable property, to taxable persons for taxable business activities will be subject to VAT. It should be noted that buildings used for residential purposes are exempt.
The lessor has the right, provided that certain requirements are met, to irrevocably choose for the non imposition of VAT to the lessee of the immovable property.
In addition, the law provides 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.
Despite the amendment it is true that there a series points in the new provisions that need to be clarified and explained by the lcal Tax Authorities. For example Residential leases are exempted from VAT, but this is unclear if this applies where the owner of the property carries out a business activity. Certain definitions are also uncertain such us the definition of building land.
The inaccuracies and gaps are likely to later lead to problems of implementation and consequently any potential buyer and or tenant of Property should first seek for expert advice and then proceed with any transaction.
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Important Note: The information contained herein is does not constitute legal advice and should not be relied upon as such.