VAT refund for acquisition of residential land.

VAT refund for acquisition of residential land.

The Cyprus Council of Ministers decided to reduce the VAT rate on building land from 19% to 5% in the form of a refund, under certain conditions.

It was decided to lower the effective VAT rate on the acquisition of building land to 5%, in order to match the applicable VAT rate on the acquisition/construction of a qualifying primary residence in Cyprus.

The VAT Directive, Directive 2006/112/EC and the national VAT Law, N.95(I)/2000, do not allow for a reduced rate on the supply of land, therefore this action will be effected via a refund of 14% to reduce the effective rate to 5%.

The purchase of a residential land will continue to be subject to VAT at the standard rate of 19%, however where the land will be used for the construction of a permanent residence which qualifies for the reduced rate of 5%, then the buyer will be eligible to apply for a refund of the VAT paid for the purchase of the land to reduce it to an effective rate of 5% matching the rate applicable for the construction of the primary residence.

It is further clarified that the scheme will apply for qualifying plots that have already been acquired on or after 2 January 2018 and were subject to VAT at the standard 19% rate.

To claim the refund, the relevant application form must be submitted with the Cyprus Tax Department, either during or after the submission of the application for the reduced VAT on the construction of the primary residence. The application must be accompanied by the sale purchase agreement (duly stamped), as well as the original invoice issued by the seller of the land.

In order to receive the refund, the applicant must submit, within 6 months from taking delivery of the residence, supporting documentation to prove that it is used as his main and primary residence )