Date: 01/09/2022
On 12 August 2022, the Cyprus Tax Tribunal issued its judgment
in the OSCALIA HOLDINGS LTD case (case no. 7/2021E). The Tribunal
ruled that input VAT on the acquisition of an apartment which was
acquired under the CIP cannot be deducted, on the basis that such a
property cannot be used for economic activities.
Background facts
In 2019, the Company acquired three apartments in Nicosia. The
apartments were rented and the Company was imposing VAT (i.e.
taxable rental). One of those apartments was declared by the
shareholder of the Company as a 'private dwelling' for the
purpose of obtaining a Cypriot citizenship under the Cypriot
Investment Program (CIP).
The Tax Commissioner restricted the right to deduct input VAT on
the particular apartment. The reason was that one of the conditions
of the CIP stated that the potential investor must have a private
dwelling in the Republic amounting at least €500,000 plus
VAT.
