Latest Headlines

Lower VAT on land bought for primary residence

Purchasers of undeveloped land to build an owner-occupied primary dwelling may soon be able to obtain a partial VAT refund if a bill currently being prepared by government is approved.

Bill to lower VAT on land for primary residenceTHE GOVERNMENT is preparing a bill exempting from payment of the full 19 per cent VAT, purchases of undeveloped land for the purpose of building on it an owner-occupied primary dwelling.

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.

Lawmakers had called for a change, arguing it is unfair to newlyweds who typically are buyers of undeveloped land where they plan to build their primary house.

Under a bill being prepared by the finance ministry, such buyers would initially pay the full VAT rate, but would subsequently be refunded 14 per cent VAT, so that at the end of the day they pay 5 per cent on these transactions like everyone else.

A finance ministry official told MPs on Monday that the bill would be finished in two weeks, at which time it would be presented for ratification to the cabinet.

Once passed the law would have retroactive effect, applying to purchases made since January 1 of this year.

The state budget for 2019 will also need to be amended to factor in the extra expenditure from the anticipated VAT rebates.

The same official said he did not foresee complications, as the additional expenditures arising from VAT refunds would be relatively small, given that the monetary value of purchases of undeveloped building land since the start of the year is low.

At the same time, there continues to be a lack of clarity in the law passed back in November 2017 that imposed 19 per cent VAT on the sale of building land.

That law stipulated that VAT would be imposed on all sales of building plots taking place as part of economic activity.

It was left to the tax commissioner to decide, on an individual basis, whether a transaction is commercial or not.

Some MPs are complaining that this ambiguity leaves room for abuse or unfair treatment of buyers.

Disy MP Averof Neophytou said some transactions are being treated as commercial – in which case a capital gains tax of 20 per cent is imposed – whereas others fall under income tax which may be as high as 35 per cent.

One way to resolve the issue would be to apply a single rate for all transactions, he said.

Readers' comments

Comments on this article are no longer being accepted.

  • B. Fortuna says:

    I am a non-EU citizen who is very much interested in working and living in Cyprus. I would very much like to know the law in Cyprus concerning residency. Initially, I am interested in renting an apartment somewhere near the sea. Once settled, I’d like to explore opportunities for buying a property suitable for two persons, either used or new. As a city person, my choice will be to live in a nice town or city by the sea that offers a good but inexpensive lifestyle. My other question is: are teaching positions open to non-Cypriots?
    Any help and suggestions would be appreciated. Thank you!

    Ed: It is possible for you as a non-EU citizen to get a temporary residence certificate – you can find details online at the Civil Registry and Migration Department. I’m not an expert in these matters, but I believe you need to have an offer of employment before you apply along with other information that you can read in the various sections of the Civil Registry and Migration Department’s website.

    In the private sector, teaching positions (such as teachers and teaching assistants) are open to non-Cypriots. There are many private schools in Cyprus and I suggest you get in touch with them to see what’s available. You can find these by searching the Internet.

    Apartments near the sea are expensive and you’ll get more for your money if you look for an apartment to rent in the suburbs. Rents in Limassol (where I live) have risen by more than 25% over the past two years. A few months ago a protest was held in the town about the high rents.

    As a Brit living here I find the general cost of food and eating out is lower than the UK, but dairy products milk, butter, cheese, etc. tend to be more expensive.

  • The views expressed in readers' comments are not necessarily shared by the Cyprus Property News.

  • Text size

SELECTED REPORTS

Back to top