On the 3rd of November 2017 the Parliament in Cyprus voted on a new VAT Law (No.3) of 2017 amending the main VAT Law which will to be in force on the 2nd of January 2018.
In brief the said Law states that:
(a) Building Land is now subject to 19% VAT which amends the 8th schedule of the main VAT Law to subject building land to VAT. Basically this VAT shall be imposed on the transfers of non-developed building land which is intended to be used for the construction of buildings/structures in the course of carrying out a business activity.
(b) Leasing of commercial property for business purposes is also subject to 19% VAT. All properties other than residential will be subject to 19% VAT when it is a B2B transaction and the recipient is involved in taxable activities. Particularly VAT at the rate of 19% will be imposed on the leasing of immovable property towards taxable persons (except where the lease relates to residential dwellings) as part of a taxable business activity. This particular provision shall affect the lease agreements signed as of 13th November 2017, which is the date when the above New Law was published in the Official Gazette of Cyprus.
(c) Transfers under loan reorganization or compulsory transfers are normally made without any payment by the Bank to the taxpayer. The transaction creates a VAT liability that the tax payer clearly would not be in a position to pay. For this reason, the article 11D to the main VAT Law is introduced transferring the obligation to discharge the VAT in such situations from the tax payer to the recipient (being the bank). The provisions apply to immovable property including land and/or buildings which are transferred along with the land in which they are build on, provided that the transaction takes place before the first occupation of the building. The new reverse charging provisions will come in force as of 2 January 2018 and will remain in force for a limited period of time, currently being until 31 December 2019.
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)