LAWMAKERS in Cyprus plan to draft a bill aiming to eliminate a distortion where certain buyers of real estate must pay Property Transfer Fees while others do not.
When a person buys a new property and pays VAT on it, he or she is not subject to Property Transfer Fees, whereas transfer fees do apply when the transaction involves a land lease.
“The proposal is to strike [from the current law] the obligation that once a lease is registered, and for which VAT has been paid, for the person not to pay transfer fees,” Disy MP Marios Mavridis said.
This distortion in the market is adversely impacting competition, he added.
In a related issue, the government intends to bring an amendment to the law recently passed imposing 19 per cent VAT on building land.
Currently, when someone buys a finished housing unit or apartment as their primary dwelling they pay 5 per cent VAT, whereas buying a plot of land for owner-occupied housing incurs a 19 per cent VAT charge.
Main opposition Akel said the law as it stands is dysfunctional and rife with ambiguities, leading to confusion in the real estate market.
Diko MP Angelos Votsis said the government will be submitting a bill exempting from payment of 19 per cent VAT young couples who buy land for the purpose of building a primary residence.
Also on Monday, the House finance committee discussed a bill submitted by the government designed to attract foreign investment.
The bill will introduce changes to income tax legislation, so that investments in a mutual fund or a partnership incorporated under the law governing Open-Ended Collective Investments or the law on Alternative Funds are no longer considered as a permanent establishment in the Republic.
Once these investments are not considered a permanent establishment in Cyprus, earnings arising from such investments would be taxed in the tax residency country.
By the term “alternative funds” are designated all investment funds that are not already covered by the European Directive on Undertakings for collective investment in transferable securities. This includes hedge funds, funds of hedge funds, venture capital and private equity funds and real estate funds.
Open-ended funds are collective investment schemes that can issue and redeem shares at any time.
How do you know if you paid VAT on a property (and at what rate) – there was nothing stated in the Contract of Sale (property bought off plan 2007) Should there have been?
How does Cypriot govt collect VAT due if none declared? Is this another Developer “ambiguity”?
Ed: VAT was introduced on the purchase of new properties whose application for a Town Planning Permit was submitted after 1st May 2004. As you bought in 2007 there is a good possibility that its building permit application was submitted before 1/5/04.
If VAT isn’t mentioned in your contract and the developer’s invoices do not show VAT as a separate line item, you can assume VAT was not payable.
Surely this can only bring further “dysfunction and ambiguity” in my view any property supplied without a Title Deed is in fact a leasehold property (usually on mortgaged land) so who should be liable to pay the VAT on a new home prior to transferring a Title ? The Landowner, The Developer or the Buyer ?
The most dysfunctional state in the EU does it again !!
“Main opposition Akel said the law as it stands is dysfunctional and rife with ambiguities, leading to confusion in the real estate market.”
Was it ever a) functional b) unambigous c) non-confused ???
Let’s see what variants they come up with next!
I guess it will help S t r e t c h even further the Title Deeds fiascos!
Cor blimey, no wonder no-one ever knows what they’re doing over here!!!