New VAT regulation on Land

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VCY
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New VAT regulation on Land

Post by VCY »

Hello everyone,

I read some articles about new VAT regulation on Land, but found them to contain contradicting information.

One was saying that it applies only to sales by VAT registered business, the one on Cyprus Property Buyers states that any commercial transaction of residential land is subject to VAT.

So, would sale of residential land between two individuals be subject to VAT from January?
Nigel Howarth
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Re: New VAT regulation on Land

Post by Nigel Howarth »

Hello VCY

The new law regarding VAT on land sales will come into effect on 2nd January 2018 (VAT on land sales should have been implemented by 1st January 2008).

The sale of building land to private individuals in unaffected (no VAT). But for commercial transactions (i.e. where the seller is a VAT registered company or individual) the purchaser will have to pay VAT at the rate of 19%.

It's still unclear whether undeveloped building land will be subject to VAT - we're waiting for the regulations to be published. (The Tax Department issued a circular a couple of months ago defining land that will be subject to VAT as “transfer of undeveloped buildable land which is clearly intended for the construction of one or more fixed structures.”)

And one question that no-one seems to be able to answer at the moment is whether you will need to pay Transfer Fees if you pay VAT on the land.

Update - The regulations are due to be put to parliament next week. Use the Google Chrome browser to translate the article ΦΠΑ ακινήτων: Θα φορολογούνται τα πάντα

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Nigel Howarth
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nd299
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Re: New VAT regulation on Land

Post by nd299 »

Hi Nigel and thank you as always for maintaining this golden forum.

Your reply below stated: "The sale of building land to private individuals in unaffected (no VAT). But for commercial transactions (i.e. where the seller is a VAT registered company or individual) the purchaser will have to pay VAT at the rate of 19%."

I have some question marks on this, can you revisit it? "sale of land to private individuals" doesnt sound right. Perhaps if we look at 4 scenarios:

1. Sale of building land by a VAT registered business to a private individual: I think there will be VAT
2. Sale of building land by a simple (non-registered) private individual to another private individual: This was is unclear to me. I'm hoping there won't be VAT
3. Sale of land by a business to another business: Almost certainly VAT
4. Sale of land by an individual to a business, like a developer: Again, like 2, I'm hoping there won't be VAT.

I think these are main cases people will be thinking of. If 1. and 2. are true, then it implies private individuals should really be looking to buy land from other private individuals and not businesses.

Of course there are other more complicated cases that shows how annoying this new law can be:
a) sale of land by a business which is registered, but not carrying out property activities, like a kiosk which happens to also own one piece of land.
b) or a private non-registered individual, that owns however 20 pieces of land and sells e.g. 3 different ones in one year

Anyway, thank you for any feedback you might have on my thoughts.

Cheers
Nick
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Re: New VAT regulation on Land

Post by Nigel Howarth »

Hi Nick

I can't answer your questions at this time - hopefully the regulations will be available soon, which should hopefully clarify the situation. I know that AKEL want land purchased by first home buyers to be exempted from VAT and someone else wants to exempt land that's included in restructurings.

(I've corrected the link I provided in my previous reply.)

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Nigel Howarth
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Nigel Howarth
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Re: New VAT regulation on Land

Post by Nigel Howarth »

The Cyprus News Agency published and update on the sitiation regarding VAT on land sales earlier today (original translated from Greek using Google):

The House of Representatives adopted by 31 votes in favor, 3 against and 17 abstentions the regulations on Value Added Tax (Determination of Undeveloped Buildable Land and Other Provisions), which regulate which pieces of building land will be subject to 19% VAT.

The regulations were tabled at the plenary session on 1 December to be urgently voted, however, AKEL has called for a postponement to examine the position of DISY President Averof Neophytou that unless the regulations are adopted by the January will be subject to VAT on any transfer of unstructured building land intended for the construction of one or more fixed structures and carried out in the course of an economic activity, in accordance with the relevant legislation.

The report of the House Budgetary and Budgetary Committee, which examined the regulations, states that the purpose of these regulations, issued under paragraph 1 (b) (iii) of the eighth Annex of the Value Added Tax Law, is the adoption of secondary legislation , which defines the category of land plots falling under the definition of undeveloped building land.

As is well known, the House of Representatives has voted on the Value Added Tax (Amendment) which is a harmonizing obligation of the Republic of Cyprus with the European Directive 2006/112 / EC of 28 November 2006 on the common system of value added tax, of the land to be built on value-added tax (VAT) at a rate of nineteen percent (19%).

It should be noted that the rules proposed by the bill had been the subject of a long discussion at the stage of its examination by the Commission. Subsequently, at the stage of submitting the bill to the plenary assembly for voting on 3 November 2017, and on the basis of the amendment tabled, it was decided that the categories of land subject to the provisions of the relevant legislation would be determined by the adoption of regulations by the House of Representatives , rather than by a decree of the Cabinet as originally proposed by the executive.

As a result of this decision, the need for preparation by the executive and approval by the Parliament of the regulations, the provisions of which are found to be in line with and are in the spirit of the respective draft decree of the Council of Ministers, which was submitted and discussed extensively by the Commission at the meetings held during the discussion of the draft law.

According to the explanatory report accompanying the regulations, Article 3 (b) of the relevant law (No 157 (I) of 2017), which concerns the taxation of uncultivated building land, comes into force from 2 January 2018.

Therefore, as noted above, if the relevant regulations are not approved by the House of Representatives before the date of application of the relevant legislation, ie before January 2, 2018, from that date onward will be levied on any transfer of undeveloped of arable land, which is intended for the construction of one or more fixed structures and is carried out in the course of an economic activity, according to the provisions of the relevant legislation.

According to the same information, the regulations have been drafted in such a way that there is clarity of the term both the undeveloped buildable land subject to tax and the condition of the land to be exempt from VAT.

The executive report stresses in the introductory report that the provisions of the proposed regulations have been discussed in the competent parliamentary committee in the form of a draft Ministerial Council decree for a long time with a view to finding a consensual solution. In the context of communication with the competent services of the European Commission, the arrangements were accepted as in line with the European acquis and the spirit of the relevant judgments of the Court of Justice of the European Union.

At the stage of discussing the regulations, the Commissioner of Taxation stated that they included, in addition to the provisions of the decree, provision under which the new tax rate is also subject to new pieces of land that can be created due to the sealing of the sea will be registered with the Department of Lands and Surveys and for which a planning permission and / or building permit has been obtained.

In this respect, a representative of the Ministry of the Interior said that this provision concerns marinas and harbors, that is land that is a state property that can be leased / leased.

Furthermore, the Commissioner of Taxation informed the Commission that, with regard to the decree, the provision under which, himself, after disclosure, after the approval of the Council of Ministers, he could differentiate the pieces of land subject to tax, with the decision of the Parliament, any differentiation can only take place with the adoption of amending regulations.


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Nigel Howarth
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VCY
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Re: New VAT regulation on Land

Post by VCY »

Some more details here:
http://www.stockwatch.com.cy/nqcontent. ... _id=287542
http://politis.com.cy/article/se-ischi- ... se-ikopeda

Sounds like any land which is considered to be used for the construction of one or more buildings is to be taxed. Question is if this applies only when seller is in the land business. Past articles like http://www.goldnews.com.cy/en/economy/1 ... --the-5-ws, raised questions like "How do we define when a seller is acting as a taxable person or not when selling land (i.e. one off sale of a building plot by an individual will be treated as economic activity and be subject to VAT?)?" ...
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