On 3 November 2017, The Cyprus House of Representatives approved a new VAT Law which amends the main VAT Law N.95(I)/2000. It was published in the Official Gazette of the Republic of Cyprus on 13 November 2017 and came into force as of 2 January 2018. Eurofast Taxand, Taxand Cyprus presents an analysis.
The new law introduces VAT at the standard rate for the sale of building land and the leasing/rental of business premises as per the conditions included in the law. It also introduces the reverse charge mechanism for VAT-subject supplies of land and property under a loan restructuring/force-sale arrangement, which will mostly impact financial institutions.
Imposition of VAT at the standard rate of 19% on building land
The standard VAT rate of 19% will be imposed in all of the following cases:
The above shall apply to non-developed building land which is intended for the construction of one or more structures in the course of carrying out a business activity.
As the property development and management industries are huge contributors to the Cyprus economy, the ripple effects of this new amendment to the VAT Law will surely impact many businesses and investments across the island, despite certain aspects still needing to be confirmed and details to be ironed out.