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The Cyprus Council of Ministers decided earlier this month to reduce the VAT rate on building land from 19% to 5% in the form of a refund, under certain conditions.

In its meeting on 11 September 2019, the cabinet decided to lower the effective VAT rate on the acquisition of building land to 5%, so as to match the applicable VAT rate on the acquisition/construction of a qualifying primary residence in Cyprus.

Both the VAT Directive, Directive 2006/112/EC and the national VAT Law, N.95(I)/2000, do not allow for a reduced rate on the supply of land, therefore this action will be effected via a refund to reduce the effective rate to 5%.

From the limited information currently available the mechanics of this will be as follows:

• The purchase of a plot of land will continue to be subject to VAT at the standard rate of 19%.
• Where the plot of land will be used for the construction of a permanent residence which qualifies for the reduced rate of 5%, then the buyer will be eligible to apply for a refund of the VAT paid for the purchase of the land to reduce it to an effective rate of 5% matching the rate applicable for the construction of the primary residence.

The Commissioner of Taxation issued on 20 September 2019 Notification ΚΔΠ 302/2019 whereby the relevant application for this refund process is communicated. This application must be submitted together with, or following, the application for the reduced 5% VAT rate on the construction of a primary residence. The refund will be made once the applicant has submitted evidence to the Department of Taxation, within 6 months of taking delivery of the residence, that it constitutes his/her permanent and main residence in Cyprus.

More details and clarifications are expected soon on the issue but at this point it is understood that the process is open to anyone who bought a qualifying plot of land since the imposition of VAT on the sale of land, i.e. as of 2 January 2018. As per the notification communicated presently it would also appear that there are no restrictions based on the size of the land but it is expected that the effective VAT rate would match that to be approved for the construction of the house. For example, if the house is over 200sq.m. the reduced VAT rate of 5% applies only for the first 200sq.m. which results in an effective VAT rate between 5% and 19% depending on the size of the house.

It is further understood that the scheme will be in line with the existing provisions and limitations applicable for the reduced rate on the acquisition/construction of a primary residence. Further guidance from the Tax Department is imminent as queries will start flowing from affected individuals.

Nicosia – The bankruptcy of Thomas Cook, which accounts for 5% to 6% of total tourist arrivals to Cyprus, left 15.000 tourists stranded on the island.

The world’s oldest travel firm, Thomas Cook, collapsed today, stranding over half a million of holidaymakers around the globe and sparking the largest peacetime repatriation effort in British history, expected to be completed by 6 October.

The liquidation marks the end of one of Britain’s oldest companies that started life in 1841 running local rail excursions before it survived two world wars to pioneer package holidays and mass tourism.

The firm employed 22.000 people and ran hotels, resorts and airlines for 19 million people a year in 16 countries.

Immediate repercussions from the collapse for Cyprus in particular includes an estimated €50m in financial losses as the company has not paid hoteliers for July and August as well as half of September.

At the same time, hundreds of thousands of airline seats will be lost, which further complicates Cyprus’ connectivity problems.

It remains unclear how much will be paid to hoteliers but Deputy Tourism Minister, Savvas Perdios, told reporters after chairing a crisis meeting in Nicosia today that “there is a high possibility this money will be lost”.

But he said that the stay of Thomas Cook customers currently in hotels in Cyprus will be covered by insurance.

Hoteliers who have bookings for the rest of the year are left counting their losses as it is difficult to fill the gap created in such a short period.

Thomas Cook brought 250,000 to 300,000 tourists to Cyprus every year mainly from the United Kingdom, but also from Scandinavian countries.

Perdios said that they account for about 5% to 6% of arrivals, but represent a higher share of overnight stays as Thomas Cook clients tended to come for longer holidays.

Other tour operators are expected to cover much of the gap but travels experts said this could take time.

Britain is Cyprus’ biggest tourism market accounting for about one third of total arrivals and the closure of Thomas Cook only adds to deep uncertainty related to Brexit.

Limassol – Tsielepis staff and guests bid farewell to the summer holidays this year with a cruise along the Limassol coastline last Friday, 13 September 2019.

The evening started with a one-hour walking tour of Limassol with tour guides Demetra and Andri who offered the group an inside look into the old town.

Then, as the sun set, staff boarded the catamaran Sail Away at the Old Port for a cruise of Limassol Bay which included food, an open bar and a DJ.

The catamaran sailed along the coast of Limassol and then anchored for the party in full view of the city at night.

Staff ate, drank and danced the night way and the party remained in full swing until the boat’s return to the harbour, three hours later.

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Brussels – The 20th International School on Indirect Taxation has extended its registration deadline until the 22^nd of September.

The conference will be held in Brussels, Belgium from 30 September to 4 October 2019 and is organised by the VAT Forum, an international partnership of indirect tax specialists.

It will be addressed by an array of renowned European VAT experts, including Chelco VAT Ltd Managing Director, Alexis Tsielepis, who will deliver a full-day seminar on the reasoning of the EU VAT Directive as well as a series of workshops.

Other seminar topics include VAT considerations in Distributed Ledger Technology, the new VAT rules for taxation of trade between Member states 2020 and an in-depth analysis of selected ECJ cases. Workshops will deal with such issues as electronic invoicing, drop shipments, supply with installation, proof of B2B supply of services, holding companies and VAT, invoices showing undue VAT, transfer pricing, logistics services, recharging expenses, the new VAT rules on vouchers and much more.

The School is designed for people who already have experience in international VAT and have sufficient knowledge of their national VAT system.

Its aim is to provide a forum for people who are responsible for international VAT within a company or group of companies.

At the event, participants can meet and talk to VAT experts from different European countries and other people responsible for VAT in major companies.

For more information and to take advantage of the registration extension, you may download the event’s brochure here.

Limassol – Managing Director of Chelco VAT, Alexis Tsielepis talks to Greek-language IN Business News media about his business and personal life, the economy, the first advice he ever gave his dad, his alarm clock, his favourite book and work-life balance… or lack of.

Alexis talked to the online news site as part of a series of interviews with selected local entrepreneurs that belong to the millennial generation.

https://inbusinessnews.reporter.com.cy/millennial_entrepreneurs/article/220283/a-tsielepis-to-work-life-balance-einai-thema-epilogs

Nicosia – July 2019 registered the highest volume of tourist arrivals ever recorded in Cyprus for the specific month.

Tourist arrivals reached 550,971 in July 2019 compared to 539,626 in July 2018, recording an increase of 2.1%.

According to the Passengers Survey of the Cyprus Statistical Service, for the period of January-July 2019, arrivals of tourists totalled 2,181,994 compared to 2,184,775 in the corresponding period of 2018, recording a decrease of 0.1%.

Tourist arrivals from the United Kingdom (UK) increased by 5.4% in July 2019 compared to July 2018 and an increase of 42% was recorded for tourists from Israel. A decrease of 4.8% in tourist arrivals from Russia and 9.3% from Sweden were recorded.

The UK constitutes the main source of tourism for Cyprus for July 2019 with 33.4%, while arrivals from Russia comprise 21.0% of total arrivals. Israel is at 8.5% and Sweden 4.3%.

For a percentage of 87% of tourists, the purpose of their trip in July 2019 was holidays, for 10.4% visit to friends and relatives, and for 2.6% business.

Limassol – There are limited seats left for the International VAT Expert Academy (IVEA) in the Netherlands in September, a high level VAT event that is not to be missed.

The two-day Academy appeals to experienced VAT managers, consultants and officials dealing with VAT from all over the world, including Cyprus, who will discuss in the course of 18 interactive workshops various issues that arise in their day-to-day business. It will be held at the Grand Hotel Huis Ter Duin in Noordwijk aan Zee on 26-27 September 2019.

Alexis Tsielepis, Managing Director of the island’s first VAT dedicated consulting firm, Chelco VAT Ltd, will lead a workshop on Financial Services and VAT: Understanding the difference between active and passive financial income.

He will also co-lead a workshop on Nasty VAT Traps with Marja van den Oetelaar, owner of the VAT Consultancy Firm in the Netherlands.

Other workshops will cover such topics as real-time reporting of VAT, Brexit and its impact on VAT and customs, EU VAT rules for online sales in Europe, intra community supplies, tax risk management, chain transactions, voluntary disclosure regimes, the latest developments on vouchers and VAT, SAP and VAT, VAT updates in the Gulf region and more. The Academy’s plenary session will be led by Prof. David Hummel, Legal Secretary at the ECJ, who will talk about ECJ case law and the impact on businesses.

Apart from Cyprus, the rest of the countries represented at the Academy by their leading VAT experts are Germany, Austria, Brazil, Belgium, the Check Republic, France, Great Britain, Italy, Hungary, the Netherlands, Spain and the UAE.

The workshops will have an international focus and be conducted in English. Following a short introduction, individual case studies will be distributed after which, participants will be given the opportunity to discuss their individual cases and to determine best practice solutions.

Limited seats are still available by contacting the organizers, the International VAT Conference Club e.V, either by email at [email protected] or by telephone at +49 89/217 5012-20.

The event’s brochure can be downloaded here.

Limassol – The European Union (EU) loses more than 150 billion in Value Added Tax (VAT) revenues every year, Tax Commissioner, Yiannis Tsangaris, revealed last week.

Addressing the international 20^th Annual VAT Summit at Parklane, a Luxury Collection Resort & Spa, in Limassol on 15-17 May, the Commissioner added that €50-70 billion of the so-called VAT Gap, which shows the difference between the expected VAT and the amount actually collected, is attributed to companies.

Fraud

Tsangaris went on to say that cross-border yearly recovery of taxes in some member states range between 0,05% to 2,21%, compared to the average yearly amounts for which recovery assistance was requested, while Missing Trader Intracommunity (MTIC) fraud alone accounts for €40-60 billion of annual VAT revenue losses.

The Commissioner said that in an effort to combat tax avoidance and streamline operations, the Tax Department is investing heavily on digitalization, adding that “digitalization changes the way tax administrations interact with taxpayers and the manner in which data is collected.”

Tsangaris revealed that every year, member states exchange automatically with each other a vast amount of tax data covering non-residents’ income, as well as information on non-residents’ financial accounts, tax rulings and, as from mid-2018, multinationals’ country-by- country reports.

The commissioner also announced there are plans to reinforce the Tax Department with new staff.

The 20^th International Annual VAT Summit, held in Cyprus for the very first time, attracted some of the world’s top VAT experts who converged in Cyprus to discuss current and future indirect tax issues.

The summit was organised by VAT Forum CV, an international partnership made up of leading indirect tax specialists based in Brussels.

Summit Agenda

The three-day event started with a welcome cocktail reception and dinner on Wednesday evening, 15 May 2019, followed by two days of high-level interactive sessions that covered such issues as taxation of trade between member states and distance sales, the effects of Brexit, the application of Distributed Ledger Technology in VAT, the 2022 VAT Action Plan and much more.

At the beginning of the event, VAT Forum President, Patrick Wille, presented to participants the wholly revamped look of the Forum and its new website, before delivering a presentation on the new VAT rules on vouchers.

Haris Hadjimichael, Head of EU Affairs and Tax Treatment with the Cyprus Tax Department, spoke about VAT Compliance: The case of Cyprus, while Chelco VAT Ltd Managing Director and VAT Forum Partner, Alexis Tsielepis, presented an overview of important cases of the European Court of Justice.

Networking

During each session, there was sufficient time to answer questions and to discuss the issues presented with the audience. The conference also offered a unique opportunity for networking.

The Summit was intended for industry professionals, such as accountants, CFOs, tax officers and tax lawyers dealing with VAT in multinational environments, VAT compliance managers responsible for VAT reporting in different Member States, VAT officials dealing with large and foreign taxable persons, VAT advisers serving multinational clients and officials from national VAT authorities.

It aimed at creating an open discussion on the latest changes to EC and national VAT legislations and the impact of these changes on businesses.

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Limassol has been ranked among the 100 best cities in the world to live in by Mercer’s latest Quality of Living ranking.

It was ranked 86th from a total of 231 cities.

Vienna topped the list for the 10^th year in a row, followed by Zurich. Vancouver, Munich and Auckland shared third place.

Making up the rest of the top ten were Dusseldorf, Frankfurt, Copenhagen, Geneva and Basel. Athens was ranked 89th.

Singapore (25), Montevideo (78) and Port Louis (83) retain their status as the highest ranking cities in Asia, South America and Africa respectively. Despite still featuring at the bottom of the quality of living list, Baghdad has witnessed significant improvements related to both safety and health services. Caracas, however, saw living standards drop following significant political and economic instability.

Mercer uses 39 different criteria to determine quality of living including housing, the political and social environment, the natural environment, public services and transport, recreation, schools and education, consumer goods availability and medical and health considerations.

The Paris-based arbitration court of the International Chamber of Commerce on Tuesday ruled in favour of the Republic of Cyprus in an appeal filed against the country by the owners of FBME bank.

The owners of the bank, which lost the licence of its Cyprus branch in December 2015, appealed to the court seeking €1.5bln in damages from the Republic of Cyprus, citing its failure to protect their investment.

In a statement on Tuesday, Central Bank of Cyprus (CBC) spokesperson, Aliki Stylianou, said that they were “completely satisfied” with the court’s ruling.

“It shows the correct decisions were made by the management and staff of the Central Bank of Cyprus,” she said.

The Law Office of the Republic also welcomed the decision, saying “it confirms that the Central Bank of Cyprus acted as a prudent supervisory authority and that the Republic did not violate any of its obligations”.

FBME bank in Cyprus has been placed under resolution by the CBC in July 2014, following a US treasury report that the bank was implicated in money laundering.

CBC issued an announcement at the time saying it had issued a decree by which it has placed the Tanzania-based bank’s branch in Cyprus under a state of resolution “with the aim of the protection of depositors.” The decree followed a suspension of the bank’s operations by the CBC and the taking over of its management.

The US Treasury report listed a number of suspicious transactions and legal violations from FBME, including allegations that a bank customer “received a deposit of hundreds of thousands of dollars from a financier for Lebanese Hezbollah.”