Cyprus. Disposals of Land. Applicability of VAT to Land Disposal Transactions
The bill, which came into force on 2nd January 2018, has amended the Value Added Tax Law (95(I)/2000) (the “VAT Law”), so that a VAT rate will be levied on transactions of undeveloped building land which are carried out after the 2nd of January 2018 for business purposes.
The amendment introduced VAT at the standard rate of 19% for the supply of undeveloped building land. The VAT is imposed in cases where the supply is intended for the erection of one or more constructions and the supply falls within the course of a person’s economic or business activities.
It is noted that the supply of land is not subject to VAT in cases where the supply is an occasional transaction. On the other hand, VAT could be levied even if the supplier is not in the business of selling land.
The amendment provides that VAT is imposed on the supply of undeveloped and buildable land including plots of land under creation or under construction, completed plots or plots with a certificate of final approval or title deed. A piece of land can be subject to VAT even if it is registered with the Lands and Surveys Department with other names such as building, residence, courtyard. Pieces of land located outside the development area for which a planning permit or/and a building permit has been obtained for a large or other type of development can be subject to VAT.
The following examples of supply are excluded from VAT: (i) the supply of land which is located in livestock zone or (ii) in areas which are not intended for development e.g. archeological or agricultural areas or zones of environmental protection.
Besides the type of the land, the nature of the supply as well as the number and frequency of the transactions are crucial factors to be taken into consideration to determine if the transaction will be regarded as a business activity. Nonetheless, each case is examined by the Tax Department on its own conditions. The Tax Department will examine, amongst the others:
(i) if an economic activity is carried out systematically or as part of a profession;
(ii) if it is based on recognized business practice or targets consumers for a consideration.
As per the provisions of the s. 3 of the VAT Law, the business activity is exercised independently, and in any place, irrespective of the intended purpose or result of the activity. Economic activities within the meaning of this Section are all the activities of a producer, merchant or service provider including extraction, farming or freelancing activities, as well as the exploitation of tangible or intangible assets for the purpose of generating lasting income.
If the plot of land belongs to a company, the land’s disposal will be subject to VAT, irrespective of the type of the economic activity that the company carries out.
The amendment provides that if the transfer of the land was concluded before the 2nd of January 2018 or if the Sales Agreement was lodged with the Land Registry or with the Tax Commissioner before the 2nd of January 2018, the transaction will not be subject to VAT.
For further information on this topic please contact
Mrs. Liza Bokova ( lbokova@pittaslegal.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.
