Imposition of VAT on letting of immovable property
As from 13 November 2017, 19% VAT is imposed on the letting of immovable properties in Cyprus.
- Imposition of VAT on rent is mandatory for any new leases or rentals of immovable properties on or after 13 November 2017 to a taxable person for the purposes of carrying on their economic activities excluding residential properties
- The lessor has the right to opt not to charge VAT on a lease transaction under certain conditions and must submit to the Tax Department the form TD1220. The lessor will be unable to claim any input VAT incurred in carrying out the leasing activity. Once the option not to tax is exercised, it cannot be revoked for that particular property.
- The Tax Department will accept as a taxable transaction the letting of immovable property when the lessee’s taxable supplies constitute at least 90% of his total supplies. The lessor will need to obtain a written confirmation by the lessee.
- A lessor imposing VAT on letting income will be entitled to claim the input VAT incurred in relation to the immovable property. Input VAT incurred on the acquisition or construction of the property and other capital expenditure can be recovered in accordance with the capital goods scheme, which provides for VAT to be adjustable over a 10-year period.
