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VAT on land

Posted: 14 Mar 2019 03:53
by Zoom123
Hello,

There was a great confusion as to when VAT is applied and when it is not when buying a plot. So far I collected the info below, but I am not sure if it is correct and complete:

VAT is NOT applied if:
1) The profession of the owner is not related with the sale of properties (developer, estate agent etc)
2) If the owner has not sold any property in the past few years (how many?)
3) If the owner does not intent to sell any other property in the next few years (how many?). If the owner sells a second property any earlier than that then he will be asked to also pay the VAT for the first property.

Also, there is an upcoming law that will apply to properties sold since the introduction of VAT on land, that if buying a plot to build your own home, 14% of VAT will be later returned to you. Is this true, and are there any criteria for this (income, if you have other property etc)?

Thank you!

Re: VAT on land

Posted: 14 Mar 2019 10:40
by Pantheman
Hello,

Depends on the land. If it is agricultural then there is no VAT applied.

If you are buying a residential building plot from an individual, not a company (developer or someone whose profession is to sell land plots) then there is no vat applied.

If you are building your first permanent residence, you can apply for the lower rate of 5% vat on the materials. What you read about vat returning is probably that in which many expats claimed back the vat, of which they had 10% of it returned.

You builder/contractor can handle this for you.

Hope that helps

Re: VAT on land

Posted: 14 Mar 2019 15:43
by Zoom123
Thanks Pantheman. My understanding is that even if it is from an individual there might still be VAT If that individual happens to own several plots and sells more than one within X amount of years (and I am not sure what X is)

Regarding 5%, I am not talking about the materials, but about the actual VAT on the plot. Supposedly there will be a law soon where the government will return 14% of the VAT if you bought the plot to build your first home.

Re: VAT on land

Posted: 14 Mar 2019 17:23
by Nigel Howarth
A couple of Cypriot friends who bought a number of plots privately ran into this problem. They bought five and decided to sell three as their gardens would be too large to manage. Their lawyer advised them that they would be liable for VAT.

“… if there is a sale of two (2) plots of undeveloped land which are undertaken several years apart as a result of an inheritance it is viewed as an isolated transaction and is not indicative of a business activity. Whereas for example, the sale of three (3) plots of land in 2017 and the sale of four (4) other plots of land in 2018 does not provide a strong indicator that this is not an economic activity and will be taxed.”

Regards,

Re: VAT on land

Posted: 15 Mar 2019 01:43
by Zoom123
Thank you Nigel, this was my understanding also. What I can't find are the specific rules. Like what does "several years" mean? It is very vague.

Re: VAT on land

Posted: 15 Mar 2019 09:25
by Nigel Howarth
Unfortunately there are no specific rules.

Regards,

Re: VAT on land

Posted: 15 Mar 2019 10:04
by Pantheman
Zoom123 wrote:
14 Mar 2019 15:43
that even if it is from an individual there might still be VAT If that individual happens to own several plots and sells more than one within X amount of years (and I am not sure what X is)
When I said individual I mean a person selling his single plot of land. He may even own another 1 or 2, but it has to be shown it is his business activity of selling plots to be liable for the vat.

With regards to the vat on the land returned, I know the AKEL (commie party) had tabled an amendment asking that first time home owners that buy a plot will pay a reduced vat rate, but I don't know if it was passed or not.