Cyprus prepares to change the preferential VAT rate

VAT (VALUE ADDED TAX) is a one-time payment made by buyers of new homes and land. Purchases of new real estate and land in Cyprus are subject to a 19% VAT.

If the following conditions are met, a reduced rate of 5% can be applied to the purchase of a residential property:

- The applicant utilizes this property as his primary and permanent residence in Cyprus minimum for 10 years.

-The applicant has no other residence in Cyprus with a reduced VAT rate.

- The applicant must be at least 18 years of age.

- Legal entities are not eligible for the VAT reduction.

- A reduced VAT property cannot be rented or used for any other commercial purpose.

A purchaser pays 19% VAT and then requests a refund. Before the applicant can take possession of the property, the application must be submitted. If the property is still being built or off-plan, the application can be submitted at any point during the construction process.

Currently the first 200 square meters of property are subject to a 5% VAT reduction. The total area can be increased for large families.

If a VAT-reduced property is sold or rented out before the 10-year period expires, the previously applied VAT refund must be returned to the state for the remaining years.

VAT does not apply to resale real estate.

Upcoming changes

The new law will specify various conditions and price ranges for the purchase of houses and apartments. Furthermore, the houses eligible for the VAT reduction must cost no more than €350,000 and be no larger than 220 sq.m. At the same time, the discount will be limited to 170 sq.m. out of a total of 220 sq.m.

An apartment must be worth no more than €200,000 and have an area of no more than 110 sq.m. to qualify for a discount. Only 90 sq.m. out of 110 sq.m. will be discounted.