Updated: September 13, 2023
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, in the European Union, is a general, broadly based consumption tax. Property transactions, land and real estate dealings belong to supply and services and are also subject to VAT.
The previous rules will be applicable to any project for which an application for a planning permission will be submitted until the 31st of 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 at the relevant VAT department:
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