VAT on Immovable Property

On the 3rd of November 2017 certain changes were made to the VAT legislation relating to immovable property in Cyprus. These involved the imposition of the standard VAT rate of 19% on:

a. Certain transactions relating to immovable property  carried out for business purposes i.e. the transfer of undeveloped buildable land, which is intended for the construction of one or more structures within the frame of business activities (effective as from 02.01.2018),

b. Leasing of commercial immovable property to taxable persons within the frame of their business activities excluding the leasing for the purpose of residential use. The lessor has the right to opt not to charge VAT under certain conditions provided that he will notify the Tax Commissioner accordingly. These conditions will be published in the Official Gazette (effective as from 13.11.2017).

Additionally the reverse charge mechanism is applicable on transactions relating to transfer of property under the process of loan restructuring and also within the context of compulsory transfer to the lender (effective as from 02.01.2018 until 31.12.2019).

All above changes have undoubtedly raised questions which require further clarifications by the Tax Department, which is expected to issue a Circular on the matter.