Ever since the identification of gaps in the bill imposing 19% VAT on building land sales in the course of a business activity, the market is in a state of chaos.
Seventy-five days after the bill came into force, the Parliamentary Committee on Financial and Budgetary Affairs tabled the main problems arising from ambiguities in the bill, with the Commissioner of Taxation seeking the help of the Parliament. One of the problems identified concerns incidental land sales.
The Committee mentioned that the circular of the Tax Department states that in case of incidental land sales no VAT is levied. Ιt was, however, later ascertained that VAT is imposed when land is purchased in an area where real estate and plots are of great value.
Another matter arising is the purchase of land through leasing. In the event that a plot is purchased via leasing, the buyer is obliged to pay both VAT and transfer fees. In this regard, the members of the Committee will table a legislative proposal to amend the bill as to reduce the tax burden imposed on buyers.
Another issue that needs to be addressed is that of newly-weds having to pay the tax when purchasing land to build their home. Today, newly-weds pay 19% VAT on the purchase of the plot and 5% VAT on construction undertakings. On the contrary, those who purchase a residence from a land development company only pay a total VAT of 5%.
Within the next few days, the Commissioner of Taxation will be filing a note to the House of Representatives, identifying the problems arising from the application of the legislation as well as the four circulars issued by the Department, specifying which land sales are subject to VAT. The members of the Committee will revisit the matter as to regulate legislative and other issue arising from VAT.