• 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.

VAT will be charged on the following transactions:

• The transfer of undeveloped buildable land which is intended for the construction of one or more fixed structures in the course of the economic activities of the transferor/seller. The status of the transferor/seller depends on the facts of each individual case. Occasional sales should be exempt from VAT where there is no other evidence indicating an intention to be engaged in an economic activity and the transaction does not distort the fiscal neutrality of other sellers making similar supplies.

• The leasing and/or letting of immovable property to a taxable person for the purposes of making taxable activities except for the leasing of a building used for private dwellings.

The lessor has the right to choose not to tax the above transaction under certain conditions provided he notifies the Tax Commissioner accordingly.

In addition, the Law provides that VAT must be accounted for in relation to transactions involving the transfer of buildings (before the first occupation) and land from the borrower to the lender under a loan reorganization or forced transfer procedure. In these cases, the recipient of the property is required to account for VAT under the reverse charge provisions provided that he is a taxable person and the property is received and used for business purposes.

The Law comes into effect as from 2 January 2018 except for the provisions regarding the leasing and/or renting of immovable property which comes into effect from 3 November 2017.

• 54 instalments for overdue taxes not exceeding 100,000 Euro with a minimum instalment of 50 Euro per month
•  60 instalments for overdue taxes not exceeding 100,000 Euro with a minimum instalment of 1,852 Euro per month

The provisions of the law are applicable for the following:

• Income tax law
• Special defence contribution law
• Capital gains tax law
• Immovable property tax law
• Stamp duty law
• VAT law
• Inheritance tax law

Once the Tax Department and the taxpayer reach an agreement to settle the overdue taxes in instalments, no new interest and penalties will accrue and no criminal proceedings will commence provided that the taxpayer meets his/hers obligations.

The Law will be modified in the near future in order to provide a relieve on interest and penalties already imposed on overdue taxes which will benefit the taxpayers by agreeing to settle the overdue taxes in instalments.

Please contact us for further information or assistance on completing and submitting your application to the Tax Department