CYPRUS: VAT LAW AMENDMENT
On the 3rd of November 2017 the Cypriot Parliament amended the VAT Law which relates to the building land taxation in order for same to comply with the provisions of the EU VAT Directive since upon joining the EU, Cyprus was given a temporary derogation under article 383 of the EU VAT Directive (Council Directive 2006/112/EC of 28 November 2006) allowing it to continue to exempt the supply of building land from VAT but this derogation expired almost 10 years ago. The provisions of the New Law will be effective as from the 2nd of January 2018. The amendments that have come into force relate to the imposition of 19% VAT on the sale of building land, secondly the taxation of new commercial immovable property leasing contracts and lastly the application of reverse charge on transactions relating to transfers of immovable property during the process of loan restructuring.
First and foremost as regards to the 19% VAT on building land such VAT rate shall be imposed in the following circumstances:
(i) transfer of indivisible land portion;
(ii) transfer of ownership and
(iii) transfer of ownership via contract or sale agreement or agreement which specifically provides that the ownership will be transferred on a future date or leasing agreement with buyout option, of non-developed building land which is intended for the construction of one or more structures in the course of carrying out a business activity.
Secondly the leasing of immovable property excluding buildings which are used as residential dwellings, to taxable persons for taxable business activities will be subject to VAT. The lessor has the right, based on terms and conditions which will be designated by the Commissioner of Taxation in his relevant Notification, to opt for the non - imposition of VAT to the lessee of the immovable property and such option is irrevocable. The provisions on leasing have immediate effect and will apply to lease agreements which are concluded from 13 November 2017 onwards.
Lastly there is also the introduction of the reverse charge provisions on transfers under loan restructuring or forced transfers of property to the lender which is to be effective as from the 2nd of January 2018 and will continue to apply until the 31st of December 2019. Particularly the imposition of VAT on the supply, transfer of ownership of immovable property in cases of loan restructuring and the compulsory transfer to the lender will be carried out via the reverse charge mechanism.
For further information on this topic please contact
Ms. Nada Starovlah (email@example.com) at SOTERIS PITTAS & CO LLC,
by telephone (+357 25 028460) or by fax (+357 25 028461)
The content of this article is intended to provide a general guide to the subject matter. Specialist advise should be sought about your specific circumstances.