24 Aug 2017
The Republic of Cyprus must comply with the EU VAT Directive (Council Directive 2006/112/EC), as part of the harmonization process amongst the European Union member states. A highly important aspect of the VAT harmonization is the charging of VAT on the sale of plots of land. It is an obligatory requirement of the European VAT Law, which should be applied without any derogation.
An adaptation period has been given to the Republic of Cyprus to amend its Laws accordingly.
As a result of the above the cost of VAT on the sale of land will eventually be suffered by the buyer. Moreover, this additional cost is likely to consequentially impact the whole building industry.
The following are some of the major concerns and issues that arise from the charge of VAT on the sale of plots of land:
1. Will the Government contribute to this retrospective cost, or will the buyers suffer the cost without any governmental contribution?
2. What will be the degree of social welfare during a sale of plot of land?
3. Will there be a re-adjustment on the selling price of land? What will be the impact of a possible readjustment on the prices of land, on land investing activities?
5. How much VAT will be charged on the sale of land? Will there be a similar adjustment to the charging of a reduced rate VAT, depending on the square meters, just like on the first purchase of new house for residency?
6. Will there be a re-adjustment on the value of financing already given by banking institutions to consumers, having a plot of land as collateral?
The Cyprus government and Parliament need to draft a specific plan to address the above issues and to reduce the impact of the amended law on the economy and the buyers, especially consumers.