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Cyprus: Cyprus amends VAT; imposes 19% on sale of building land and leasing


On November 3 2017, the Cyprus House of Representatives approved a new VAT Law that amended the main VAT Law No. 95 (I)/2000. It was published in the Official Gazette of the Republic of Cyprus on November 13 2017 and came into force on January 2 2018.

The new Law introduces VAT at the standard rate for the sale of building land and the leasing/rental of business premises as per the conditions included in the Law. It also introduces the reverse charge mechanism for VAT-subject supplies of land and property under a loan restructuring/force-sale arrangement, which will mostly impact financial institutions.

Imposition of VAT at the standard rate of 19% on building land

The standard VAT rate of 19% will be imposed in all of the following cases:

  • Transfer of ownership;

  • Transfer of indivisible land portion; and/or

  • Transfer of ownership via contract or sale agreement or agreement which specifically provides that the ownership will be transferred at a future date or leasing agreement with buyout option.

The above will apply to non-developed building land which is intended for the construction of one or more structures in the course of carrying out a business activity.

The meaning of 'non-developed building land' was clarified as land that is not located in designated livestock zones or areas which are not intended for development (such as zones/areas under environmental protection, as well as archaeological and agricultural protection).

Another criterion which needs to be considered is whether the transfer of ownership of land is included in the business activities of the transferor of the land. If not, then the transaction is not subject to VAT of 19%.

Furthermore, it has been clarified that no VAT will be imposed on the disposal of shares or shareholdings in companies, resulting in transfer of ownership of related immovable property.

The aforementioned provisions are effective from January 2 2018.

VAT on leasing of immovable property used for business purposes

The leasing of immovable property, except buildings that are used as residential dwellings, to taxable persons for taxable business activities will be subject to VAT.

However, even in the case where the property is a warehouse or office or shop or similar, the lessor should:

  • Be a taxable person subject to VAT; and

  • Lease the property for the purposes of generating taxable business activities.

A taxable person subject to VAT is defined as any person who is or should be registered for VAT. In cases where the lessee is purely a holding company, then there is no obligation for the lessee to register for VAT because it does not conduct any taxable business activities and as such no VAT is imposed on the rental amount.

Also, at the time of concluding a lease agreement between two parties, the lessor is obliged to request and evaluate the proportion of taxable/non-taxable supplies of the lessee and if the percentage of taxable supplies is less than 90%, then, the transaction is exempt and no VAT will be imposed. This is a one-time obligation of the lessor at the time of concluding the lease agreement; the lessor has no further obligation to re-evaluate the lessee's taxable supplies.

Finally, the lessor has the right – based on the terms and conditions which will be designated by the Commissioner of Taxation in the relevant notification – to opt for the non-imposition of VAT on the lessee of the immovable property. The option is irrevocable.

The provisions on leasing have immediate effect and will apply to lease agreements concluded from November 13 2017 onwards.

Introduction of reverse charge provisions on transfers resulting from loan restructuring or forced transfer of property to lender

Transfers under loan reorganisations or forced transfers are normally made without any consideration by the bank to the taxpayer. Under the new VAT Law, such transactions create a VAT liability. However, the taxpayer clearly would not be in a position to pay. For this reason, a new article was introduced in the main VAT Law which stipulates that the obligation to discharge VAT in such situations is transferred from the taxpayer to the recipient (the bank).

The provisions apply to immovable property including land and/or buildings which are transferred along with the land on which they are built, provided that the transaction takes place before the first occupation of the building.

The new reverse charge provisions came into force as of January 2 2018 and will remain in force for a limited timeframe, the existing cut-off date being quoted as December 31 2019.

As the property development and management industries are substantial contributors to the Cyprus economy, the ripple effects of this new amendment to the VAT Law will surely impact many businesses and investments across the island, despite certain aspects of the new VAT Law still needing to be ironed out upon application.



Maria Nicolaou

Zoe Kokoni

Maria Nicolaou ( and Zoe Kokoni (

Eurofast Global

Tel: +357 22699222


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