VAT & Understanding
14 January 2017
Nobody knows at the end dear readers
what is happening and the situation is not clear
also regarding agricultural land with the only clear
exemption for certain categories (agricultural
zones, Natura areas etc).
We are at a
loss dear readers what are the new VAT provisions all about.
We have read the law over and over again and we have
attended one lecture on the subject given by one of the
international auditors, but we still cannot profess that we
understand fully the provisions. What we are somewhat clear
about (not 100%) and a subject which may be of particular
interest to foreign residents regarding rentals and land
purchase is as follows:
Residential properties let out will not bear a VAT
(+19%). Commercial properties if let post to 2018 will
bear the VAT charge unless the landlord declares upfront
that he does not wish to have this charge. No major harm
done, but if VAT is charged, it is so only if the tenant
is a VAT registered, so that he can claim the VAT back.
The law refers to the exemption of the residential units but
there is a confusing proviso that the property is not to be
placed into “an economic activity”.
So, what does this mean? If a house is let as
holiday/seasonal/ daily let and/or on a Airbnb is this not a
business activity, be it a residence? If our understanding
is correct, VAT should be charged, increasing the rental by
19% (will this not put off prospective season tenants who
are not VAT locally registered?).
Buying a building plot will bear a 19% VAT charge if bought
from a person/owner who is dealing with development/real
estate business. So, two adjoining plots are for sale, one
from a developer and the other by a private individual who
does not do this (sale of plots) as a business the second
plot will be less 19% from the first!!
Confusion is going on however if a private individual sells
a plot without VAT situated within an area where nearby a
developer is selling similar plots with VAT, then the VAT
authorities might charge the private seller also with VAT
for “avoidance” of unfair competition”!!
Bearing in mind (be it not clear) that in case VAT is paid
by the buyer, he will not be liable for the transfer fees
(so out of the 19% charge a reduction by approximately 4%
transfer fees - net cost 15.
if someone buys a plot in shares (e.g. a Co owning the plot)
no VAT is charged.
Because developers will sell you a plot with a 19% VAT but
then they can claim it back, they will be in a more
competitive position than a private individual who will pay
the 19% with no refund. So if one appoints the same
developer who sells you the plot to build your house with a
total VAT charge of 5% (main residence) he will be in a more
competitive position than building yourselves your home?
Even those consultants who gave us the lecture did not fully
understand as they have no answers to all the questions and
it will take a while say a period of at least 6-8 months to
clear the situation. The VAT authority says for any enquiry
should be addressed to it for clarification. Bearing in mind
that the Governmental Departments do not answer within the
same day, but more likely 2-3 months, so what happens in the
meantime? Will the seller hold back the property until the
authorities decide? If then there is a sales contract and no
VAT is charged what will the situation be if the VAT
authority decides afterwards that the 19% should be charged?
Nobody knows at the end dear readers what is happening and
the situation is not clear also regarding agricultural land
with the only clear exemption for certain categories
(agricultural zones, Natura areas etc).
We will come back to you as added information is received.