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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.

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.
  •  This property will be used exclusively for the residence of the applicant, and not for the purpose of generating income (for example, from renting).

  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On November 18, 2016, the previous rule was repealed, according to which a 5% VAT preferential rate was not applied if the total covered area of ​​residential real estate exceeded 275 sq.m. Today, there is no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. anyway.

 How it looks in practice:

We assume that the area of ​​the property is 340 sq.m., and its cost is 800.000 euros.

The VAT calculation is as follows:

800.000 х 5% х 200/340 = 23.592.4 euros, plus

800.000 x 19% x 140/340 = 62.588,2 euros

Total, VAT payable will amount to 86.180,6 euros.

The total value of the property = 886.180,6 euros

 LIST OF DOCUMENTS FOR PREPARING A PREDERENTIAL VAT RATE

A buyer applying for a preferential rate should file an application in VAT Department for the application of the VAT exemption. Together with the application, a declaration is filed that previously he did not acquire another property in Cyprus at a reduced VAT rate. In case the applicant is married, the spouse should also submit a similar application and a declaration.

 The application shall be accompanied by the following documents:

  •  Purchase / sale agreement of real estate
  •  Copy of the applicant's passport
  •  Copy of the spouse's passport if the applicant is married
  •  Marriage certificate if the applicant is married
  •  Architectural plans for real estate
  •  Declaration confirming the appropriate size of the property, certified by the architect, or a civil engineer
  •  Certified copy of building permits
  •  

Documents confirming that the applicant uses real estate as the main residence in Cyprus:

  •  Copies of electricity bills
  •  Copies of water bills
  •  Copies of telephone bills (Internet)
  •  Copies of municipal tax bills
  •  Any other documents confirming the use of this property as the main housing in Cyprus.

The above-mentioned documents may be submitted to the VAT Department not later than six months from the date of their issue, and are part of the application for the application of the VAT exemption.