In November 2017, the Cyprus House of Representatives passed new legislation amending the Cyprus VAT Law N.95(I)/2000 bringing Cyprus VAT Law in line with the VAT Directive from the European Union.
This effectively introduces VAT payable at the standard rate on the following scenarios in Cyprus:
- The sale of undeveloped building land by individuals exercising economic activities.
- Renting or leasing immovable property for business purposes.
- Transferal of land or property & the reverse charge mechanism remedy under a loan reorganisation or forced transferal procedure.*
What does this mean?
Up until the 1st of January 2018, both the sale of land and leasing of immovable property in Cyprus were previously exempt from any tax burden according to the relevant legislation.
Currently, if completed as an economic activity, any sale of undeveloped building land, intended for the construction of one or more fixed structures is subject to VAT at the standard rate of 19%. Therefore, in order to determine whether a transaction is subject to VAT or not, the following phrases have to be examined.
*When the transferal of land or property is subject to VAT and is conducted by the borrower to the lender via a loan reorganisation or forced transfer procedure, the recipient of the property (the bank) is obliged to apply the reverse charge mechanism and consequently discharge the VAT due on the transaction as if it was its own supply. Therefore, the obligation for imposing and paying the relevant VAT is transferred from the supplier to the recipient of the property.
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