Cyprus: Imposing VAT On Sale Of Land In Cyprus – A One-Way Street

Last Updated: 14 March 2017
Article by Panayiotis Panayi (Chelco VAT)

Currently the Eighth Schedule of the Cyprus VAT Law1 exempts the supply of land from VAT. Thus, currently when any plot of land is sold it is not subject to VAT.

For quite some time now there have been ongoing discussions with regards to the introduction of VAT legislation that will remove the exemption on transactions of land and will make such transactions subject to VAT going forward.

The fact of the matter is that this is a one-way street. Why?

Firstly, we need to understand that keeping the exemption in our VAT legislation is not an option. The derogation allowed by Article 383 of the EU VAT Directive2, granted during our accession to the EU, allowed us to continue to exempt the supply of building land until 31 December 2007. This derogation has expired for nearly 10 years now but we have to date failed to amend our legislation and introduce provisions that would subject to VAT the supply of (building) land. There is no infringement procedure currently against us by the EU Commission with regards to this non-compliance, but it is only a matter of time before proceedings are initiated.

Furthermore, the sale of land is not one of the transactions listed under Annex III of the EU VAT Directive, therefore a reduced rate cannot be applied to such transactions so subjecting them to VAT means that they will be subject to the full rate, which currently stands at 19%.

The law has been very close to going to the Parliament for voting but there has always been a change of hearts at the last minute and based on numerous excuses it has always been sent back to the relevant parliamentary committee for more discussions and negotiations. Given the impact that imposing VAT on land would have on the economy, it is easy to understand why.

The biggest problem will be faced by the banking institutions that hold land as collateral. Where land that is held as collateral against a loan is say worth €1m, if VAT would be imposed, the market value of this land would not be €1.190.000, but would still remain €1m, but this time inclusive of VAT. The VAT element is approximately €160.000 which means the market value would become €840.000. This in turn would mean that the bank would need €160.000 of further collateral against the loan. Applying this on a national basis, the deficit would run into several hundreds of millions of euro.

It is essential that the legislation is discussed with all relevant parties to make sure that what is finally passed, is a law that works well and does not kill the construction and property development sectors overnight as this would lead to a cool off in the market and quite likely a drop in the country's GDP as these are major industries contributing to the current strong(er) performance of the country's economy.

Some of the things legislators need to consider and make sure they are addressed in the new legislation are:

  • What land will be taxed? Do we want to tax all land including farm land and industrial land or do we want to concentrate on building land which has been zoned as such by the Land Registry? Bear in mind that the EU VAT Directive imposes VAT on the supply of building land so we need to be careful as to our interpretation of building land, and to the extent possible, place a very restrictive definition, at least initially, to minimise the macro economic impact, especially to the banking sector.
  • Should we be introducing an option to tax leasing/letting of immovable property to reduce the impact of the legislation? Cyprus is among very few Member States who have chosen not to introduce an option for taxation on the above mentioned transactions.
  • What happens to occasional supplies made by individuals? If a non-taxable person that does not engage in an economic activity for VAT purposes chooses to sell a plot of land inherited by him will this be subject to VAT or will incidental transactions not constitute an economic activity?
  • What happens to transactions where the shares of a land-holding company are sold instead of the land itself? This is another option granted to Member States by Article 15(2) of the VAT Directive. But imposing this option requires very detailed planning as it can become very complicated to determine the taxable basis where the company whose shares are being sold, may also have other income generating assets or subsidiary companies. The question of who is to discharge the VAT obligation in such cases is also difficult to legislate.
  • Back in March 2012 we introduced in our VAT legislation article 11B, which imposed the reverse charge mechanism on most construction-related services as a means of combating the high levels of fraud and tax evasion experienced in the sector as well as minimising the financing of VAT by recipients who had the full right of deduction. Should a similar approach be followed with regards to VAT on the supply of land and under the reverse charge mechanism have the buyer discharge the due VAT? If yes, this requires careful consideration as to the circumstances of how it will work.
  • We also need to accommodate the cases of foreclosure where the rights over such immovable property might be transferred to a bank or another financial institution.

We always need to remember that VAT is a consumption tax and as such, it is always borne by the end consumer.

The change will undoubtedly cause some numbness in the market but a price correction will accommodate such a change. And if the economy proved resilient enough to rise through the ashes of what happened in 2013, then imposing VAT on the supply of (building) land will not be the end of the world as we know it.

The fact of the matter remains that VAT on building land is not an option but an obligation which we must meet. A one-way street.


1Οι περί Φόρου Προστιθέμενης Αξίας Νόμοι Νόμος 95(Ι)/2000 όπως τροποποιήθηκε

2 Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Michael Kyprianou & Co LLC
Michael Kyprianou & Co LLC
Michael Kyprianou & Co LLC
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Michael Kyprianou & Co LLC
Michael Kyprianou & Co LLC
Michael Kyprianou & Co LLC
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions