On Thursday 29th July the plenary session of the Cyprus Parliament passed a law allowing for a 5% reduction in the VAT rate on the first 130 square metres of homes in Cyprus.
Did someone say reduced VAT?
The properties this law applies to include both houses and apartments. To be more specific, the reduced VAT rate will apply to the first 130 square meters of a primary residence up to the value of €350,000, provided that the total transaction value does not exceed €475,000.
The new VAT reduction takes the rate down from 19% to 5% on the property they wish to buy, if it’s valued between €350,000-475,000. The reduced VAT rate will only apply to the first 130 square metres of the property. So, if your property exceeds 130 square metres, you’ll have to pay 19% VAT on the remaining square metres.
The law passed almost unanimously with 42 deputies in support and only one abstention. The draft law also includes a provision allowing the applicant of the reduced 5% VAT rate on the first 190 square metres of a constructed area for disabled individuals.
Please note: You do not have to pay VAT on resale properties. Just new or off-plan homes. Find out about off-plan homes here.
Do I qualify?
As a foreign buyer, you cannot benefit from this on your first purchase in Cyprus as the reduced 5% rate applies to permanent residents of Cyprus and individuals who plan to build or buy a new house as their main and permanent residence, provided that they do not have any other property in the Republic of Cyprus, which they acquired through the application of a reduced VAT.
It is important to note that in order to qualify for a reduced VAT, the property must be a new residential unit that will be used for the first time from the date of delivery or construction.
Is this a first?
No. There have been similar laws in place for homes in Cyprus in the past. From October 1, 2011, a law was in place for the application of a reduced 5% VAT rate on the purchase or construction of a new dwelling in the Republic of Cyprus.
This law only applied when the dwelling in question was used as a primary residence and the owners had permanent residence in Cyprus.
This application was only available in Greek; therefore, we expect the new application for the reduced VAT rate to be the same.
While translation services are available, your lawyer will, more often than not, have in-house translators or dual-speaking employees in-house who can help you through the application process.
What VAT measures are currently in place?
According to our trusted legal partner, Polycarpos Philippou, VAT is applicable on the purchase of brand-new property in Cyprus (since May 2004) and the purchase of land (since 2018). The VAT rate in Cyprus is 19% and is usually paid in addition to the purchase price.
Should you have any queries about VAT in Cyprus, speak to Eleni and the knowledgeable team at Polycarpos Philippou.
After some legal guidance?
We asked Polycarpos Philippou for comment on what they can help our readers with….
“We are pleased to assist prospective clients with their various needs, including guidance on the reduced VAT law, Permanent Residency applications, as well as purchase and sale transactions.
Our fees for these services are determined based on the complexity of each transaction. We strive to provide professional and straightforward advice to ensure a smooth and satisfactory experience for all of our clients.”
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