Cyprus VAT Info
VAT on the purchase of real estate in Cyprus
When buying a new Cyprus property, it is required to pay VAT. The rate of VAT on the territory of the Republic of Cyprus is 19%. Purchase of the secondary housing market object, as well as objects of the primary real estate market that have a building permit issued before May 1, 2004, are not subject to taxation.
- 19 % VAT on NEW built properties
- 5 % VAT if it qualifies for the preferential requirements
- 0 % VAT if building permit is issued before 2004
INNOVATION OF 2012
We inform that under the new law 73 (1) / 2012, which entered into force on June 8, 2012, important amendments were made to Cyprus tax law. Now, according to the new law, when buying new real estate, a preferential VAT rate of 5% will be levied instead of the current rate of 19%. This law provides the buyer of new real estate the possibility of significant savings.
OBLIGATORY CONDITIONS FOR OBTAINING A PREDERENTIAL RATE
The preferential VAT rate is provided subject to the following rules:
- The buyer should be an individual (not a company) who has reached 18 years of age.
- Purchased property should be the main place for the applicant's residence in Cyprus.
- The applicant should not have property acquired earlier at a reduced VAT rate so it is the first property purchased
- This property will be used exclusively for the residence of the applicant, and not for the purpose of generating income (for example, from renting out).
According to the law, the preferential VAT rate is valid for the first 200 square meters of living space, according to the architectural plan approved by the official authorities of the Republic of Cyprus.
INNOVATION OF 2016
On November 18, 2016, the previous rule was repealed, according to which a 5% VAT preferential rate was not applied if the total covered area of residential real estate exceeded 275 sq.m.
Today, there is no such restriction, regardless of the area of residential real estate, the preferential rate of 5% is applied for the first 200 sq.m. of the total of 340 sq.m anyway.
How it looks in practice:
We assume that the area of the property is total 340 sq.m., and its cost is 800.000 euros.
The VAT calculation is as follows:
800.000 х 5% х 200 sq.m / 340 sq.m = 23.592.4 euros,
800.000 x 19% x 140 sq.m / 340 sq.m = 62.588,2 euros
- Total, VAT payable will amount to 86.180,6 euros.
- The total value of the property = 886.180,6 euros
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