Date: 01/09/2022

On 12 August 2022, the Cyprus Tax Tribunal issued its judgment in the OSCALIA HOLDINGS LTD case (case no. 7/2021E). The Tribunal ruled that input VAT on the acquisition of an apartment which was acquired under the CIP cannot be deducted, on the basis that such a property cannot be used for economic activities.

Background facts

In 2019, the Company acquired three apartments in Nicosia. The apartments were rented and the Company was imposing VAT (i.e. taxable rental). One of those apartments was declared by the shareholder of the Company as a 'private dwelling' for the purpose of obtaining a Cypriot citizenship under the Cypriot Investment Program (CIP).

The Tax Commissioner restricted the right to deduct input VAT on the particular apartment. The reason was that one of the conditions of the CIP stated that the potential investor must have a private dwelling in the Republic amounting at least €500,000 plus VAT.

Therefore, it was considered that the apartment was not acquired for business purposes but rather for private use and for obtaining a Cypriot citizenship under the Cypriot Investment Program (CIP).


The Tax Tribunal agreed with the decision of the Tax Commissioner and ruled that, since the Council of Ministers has approved the citizenship application of the shareholder, it means that for the purposes of the CIP and in conjunction with the CY VAT legislation, the apartment in question cannot be used by the Company for the purpose of exercising an economic activity.

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