the 5% Reduced VAT Scheme for Property Purchases in Cyprus
Overview
When acquiring a new property in Cyprus, the buyer is required to pay the applicable VAT charge of 19% on the purchase price. However, according to Law 42 (I)/2023, Cyprus offers a scheme that reduces the VAT rate to 5% for property purchases, provided that certain conditions and criteria are satisfied.
Requirements
The buyer may apply to the VAT Authority for a reduction in the VAT rate from 19% to 5% under the following conditions:
- The property should serve as the buyer’s primary and permanent residence in Cyprus for a minimum of 10 years.
- The buyer must be an individual; companies are ineligible to apply for the 5% reduced VAT.
- The buyer has reached the age of 18.
- The property must be newly constructed (first-time sale) and not previously owned.
- The buyer is required to submit the application for the 5% reduced VAT to the Tax Department prior to the delivery or occupation of the property.
- The buyer must not have received a Reduced Rate VAT certificate in the past 10 years.
Implementation
Implementation of the 5% reduced VAT:
1- Any section of the property that measures between 131 and 190 m² is subject to the standard VAT rate of 19%.
If the total area of the property exceeds 190 m², the entire property will be taxed at 19%, not just the portion that surpasses the limit.
2-The primary residence shall have a maximum value of €350,000.
3- For properties valued between €350,001 and €475,000: The reduced VAT rate may still be applicable, but only on the initial €350,000 of the property’s value—and again, only for the area of the property up to 190 square meters.
4- Individuals with disabilities are eligible for a reduced VAT rate on the property for the first 190 sq. m.
Application
Application procedure for obtaining the 5% reduced VAT certificate:
The following documents must be submitted:
- Contract of Sale (signed and stamped).
- Passport / ID copy
- Signed and scanned declaration from the architect/civil engineer
- Signed and scanned declaration from the Building Contractor
- Proof of payment to the Developer/Building Contractor
- Annual Contractor License for the construction period of the project
- Marriage certificate (if applicable)
- Planning / Building Permits and their applications
- Certificate of Buildable Area issued by the competent authority.
- Application Form