Updated: May 20, 2024
A reduced VAT system for primary residences to boost home ownership is already in place. The reduced percentage for primary residences is 5% against a general percentage of 19%. This reduced percentage of 5% is still the same, but some criteria were changed by law in June 2023.
New criteria for the VAT on primary residence were introduced in June 2023 with Law 42(I)/2023. The reduced rate remains the same (5%), but the property’s square meters are now lower. A transitional or grace period applies.
The Value Added Tax, or VAT, is a general, broadly based consumption tax in the European Union. Property transactions and land and real estate dealings belong to supply and services and are also subject to VAT.
The previous rules apply to any project for which an application for planning permission was submitted before 31 October 2023.
A reduced rate of 5% is applied to the first 200 square metres (sq m) of a property, provided:
The 200 sq. meters include the internal covered areas (not including stairs).
What if a property is larger but satisfies the other criteria?
The standard 19% will apply to the remaining square metres.
In June 2023, Cyprus changed the reduced VAT on primary residence criteria.
Under the new rules, the reduced rate of 5% applies to the first 130 sq m of a primary residence, provided that:
Individuals with disabilities are allowed a reduced rate of 5% on the first 190 sq m of a primary residence.
The new legislation is Law 42(I)/2023, published in the Government Gazette on 16 June 2023.
The new rules will not apply where:
The application for a reduced VAT rate is submitted to the relevant VAT department:
Our team of Cyprus property lawyers provides the following services:
Do you pay VAT when buying real estate in Cyprus?
Yes. You pay a VAT of 19% unless the property is your primary dwelling. First-time buyers are allowed a reduced VAT of 5% upon conditions.
When is VAT payable when buying property in Cyprus?
VAT is always payable for real estate. If you mean when it needs to be paid, it is usually upon purchase. You can also apply for a reduction.
Is there a 5% VAT on renovations of properties in Cyprus?
Yes. A reduced VAT of 5% applies to the following services: plumbing and electrical, carpentry, painting, and construction. The property must be considered “older”; at least three years have passed since moving into it. The materials are included in the reduced VAT if their value is more than 50% of the value of the whole service.
How do I apply for the reduced % VAT rate of 5% on purchasing a Cyprus property?
You will apply with a declaration to the Tax Department. You must apply before moving into the property: at any time during construction or, if you bought it from a developer, before moving in. An exception to this rule was made in April 2024: it is now possible to apply for reduced VAT within twelve months of moving in, provided you missed the previous deadline because of absence from the Republic, illness or other serious reasons. There is a list of required documents, which you must attach. These documents are specified in the Declaration. With some exceptions, you cannot apply if you have received a grant under the Special Grant (Purchase or building of a home) Law.
George K. Konstantinou
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