PUBLICATIONS
VAT in Cyprus: Value Added Tax on Immovable Property
These amendments were necessary for the purpose of aligning Cyprus VAT law with the European Directive 2006/112/EC on the common system on value added tax. Upon joining the European Union, the Republic of Cyprus had exercised its right to derogate from the obligation to enforce the Directive’s provisions regarding to the imposition of VAT on transactions on building land. The right of derogation was valid until the 31st of December 2007, and the amendments were only set in place after a ten-year delay, in 2017.
According to the provisions of the Law on VAT, as amended, now VAT is imposed at the rate of 19% on the value of the transaction related to immovable property in the following transactions:
1. Rental of immovable property to a lessor who is a person subject to tax, for the purpose of carrying out business activities by the person.
2. Rental of a building or a part thereof with an option to purchase, when the rental takes place before the building’s first use.
3. Transfer of a building or a part thereof and of the land on which it is situated or a transfer of an undivided share thereof, when the transfer takes place before the building’s first use, unless an application for a planning permit has been duly filed with regards to the property, prior to the 1st of May 2004, or where such permit is not required by virtue of a government decree.
4. Transfer of the posession of a building or a part thereof and of the land on which it is situated or a transfer of an undivided share thereof, by virtue of a contract of sale or by virtue of a contract of sale according to which the buildings are to be transferred along with the land at some point in the future, or by virtue of a lease thereof, with an option to purchase provided that it takes place before the building’s first use, unless an application for a planning permit has been duly filed with regards to the property, prior to the 1st of May 2004, or where such permit is not required by virtue of a government decree an application for a building has been duly filed with regards to the property, after the 1st of May 2004.