VAT ON PROPERTIES

1. When a physical person buys property for residency purposes:

• They will pay 19% VAT on the Property.
• They will pay 5% VAT if it is their first residency (rules apply).
• Usually, VAT on resales transaction is not applicable but transfer fees do apply.

Cyprus VAT legislation stipulates a standard VAT rate of 19% on the acquisition of newly constructed real estate. However, the

re exists an exception wherein a reduced VAT rate of 5% is applicable to the construction or purchase of houses or apartments intended for first-time home buyers who plan to utilize the property as their primary and permanent residence.

Projects for which the planning permission have been filed up to 31/10/2023:

The reduced percentage of 5% VAT will be imposed for the first 200 square meters of the buildable area, irrelevant of the purchase price. Any area above 200 square meters is subject to the normal rate of 19% VAT.

Projects for which the planning permission have been filed from 01/11/2023:

According with the new provisions of the law, the new provisions for reduced VAT will apply to the first 130 square meters of the buildable residential area, based on the building factor and architectural plans, presented to get the planning permit, up to the property value of €350,000 provided that the total transaction does not exceed €475,000 and the total buildable area is no more than 190 square meters.

Both schemes impose an obligation for a purchaser to maintain ownership and residency in the property for a minimum period of 10 years. If the purchaser indents to sell and or rent out the property before the 10-year period elapses, payment is required to the Tax Department for the VAT difference, in proportion to the remainder of the 10-year period.

2. When a physical person or a company buys property for residency purposes of acquiring rental income or resell the property:

• If the property is bought ready (already constructed):

1. 19% of VAT will apply if the property is new and has not been previously used.
2. No VAT will be applicable if it is a resale transaction.

• If the immovable property is bought with intention to developer and rent it out for residency purposes and long term:

1. VAT on the land will bear 19% VAT
2. VAT on the construction will bear 19% VAT

• VAT in this case can be claimed back.

• If the immovable property is bought with the interion to developer and rent on a short-term basis:

1. VAT on land will bear 19% VAT
2. VAT on the construction is 0%

• VAT in this case can be claimed back.

• If the immovable property is bought with the intention to development and sell:

1. VAT on the land will bear 19% VAT
2. VAT on the construction is 0%

• VAT in this case can be claimed back.

It is important to note that performing a conclusive tax assessment requires careful consideration of all relevant facts and circumstances.  It is therefore imperative to obtain tailored tax advice.