What is Article 11B? Why was there a need to introduce? And why should it not be abolished?

 
The meaning of  Article 11B:
 
When the services provided by law are provided in the context of any civil engineering project between two Taxable Persons (VAT) then VAT is reimbursed by the recipient by the method of reverse charge.
When, for example, a land development entrepreneur buys real estate services from a contractor, then the contractor does not charge VAT on his invoices and the land development entrepreneur charges VAT by the method of reverse charging as if he provided the services himself. In cases where the recipient has a full right to deduct his input VAT, then there is no VAT payable / refundable and the VAT refund is simply an accounting entry.

Why was it necessary to introduce Article 11B?

On March 9, 2012, the amending law L.16 (I) / 2012 was published in the official newspaper of the Republic, which added article 11B to the Laws on VAT Law 95 (I) / 2000.

The report of the Parliamentary Committee on Finance and Budget that accompanied the bill states the following reasons for the relevant amendment:

A. Stimulating the growth of the economy, enhancing the liquidity of enterprises in the construction sector.

B. The fight against tax evasion and tax avoidance.

C. Enhancing the liquidity of companies in the construction sector.

Prior to the introduction of Article 11B, the development entrepreneur paid VAT to the contractor on the basis of the invoices he received. Even if he had the right to deduct input VAT there was always a time difference from the time input VAT was paid to contractors until either the credit balance was offset against output VAT or reimbursed by the Tax Department. This created a need for VAT financing which led to increased financing costs.

With the introduction of Article 11B, the land development entrepreneur does not pay VAT to the contractors. It owes it by accounting entries having an immediate tax neutral result.

You can find it here:

https://www.mof.gov.cy/mof/TAX/taxdep.nsf/All/BEC1EC21485BCA77C22582260046ED3E/$file/EE%20166.pdf?OpenElement