Cyprus: Non-deductible input VAT on acquisition of apartment under Cypriot Investment Program (tribunal decision)
A Tax Tribunal decision concerning non-deductible input VAT on acquisition of apartment under Cypriot Investment Program
Non-deductible input VAT on acquisition of apartment under Cypriot Investment Program
The Tax Tribunal recently held (case no. 7/2021E) that input valued added tax (VAT) on the acquisition of an apartment that was acquired in order to obtain citizenship under the Cypriot Investment Program cannot be deducted because the property was not acquired for business purposes and cannot be used for economic activity.
Summary
The taxpayer acquired three apartments in Nicosia in 2019. The apartments were rented and the taxpayer was imposing VAT (i.e., taxable rental). One of those apartments was declared by the taxpayer’s shareholder as a “private dwelling” for the purpose of obtaining Cypriot citizenship under the Cypriot Investment Program.
The tax authority denied the right to deduct input VAT on the apartment on the grounds that the apartment was not acquired for business purposes, but rather for the private use of obtaining Cypriot citizenship for the taxpayer’s shareholder under the Cypriot Investment Program.
The Tax Tribunal agreed with the tax authority and also noted that under the Cyprus Investment Program, the apartment cannot be used by the taxpayer for economic activity.
Read an August 2022 report prepared by the KPMG member firm in Cyprus
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