VAT ON NEW PROPERTY IN CYPRUS
VAT is only payable on new property. Resales are exempt. Upon the sale of a new property the buyer pays VAT at a rate of 19 % .
There is a special reduced rate of VAT (Value Added Tax) of 5% on the acquisition or construction of homes for use as the main permanent place of residence.
Contracts that have been completed from 01 October 2011 qualify and must be for a home that is to be the main permanent home for the following 10 years. This facility is also available to non members of the European Union so long as they can prove that the home will be their main permanent residence in the Republic of Cyprus.
Eligible persons who have completed contracts before 30 September 2011, must apply for a grant. The special reduced rate applies to the first 200sq metres for homes with a covered area of up to 275sq metres. There are special benefits for families with 3 or more children, in which the total covered area increases by 15 sq metres for each additional child above the 3 child threshold.
The applicant must apply using a special form which is issued by the VAT Commissioner. The information required on the form must show that the home is to be used as the main home for the next ten years, proof of ownership, supporting documents of utility bills, such as electric, water, telephone, and local municipal taxes and must be submitted within 6 months of the person obtaining possession of the home.
In the event that the home will cease to be the main home within the 10 year period, the owner must inform the VAT Commissioner within 30 days of leaving the home. The owner will then be liable to pay the difference of the reduced rate of VAT and the current VAT rate for non eligibility.
There are severe penalties for owners who make false claims as this is treated as a criminal offence. In the event of conviction the owner may face substantial fines, imprisonment or both. This attempt at defrauding the VAT Commissioner is taken very seriously.
If you wish to get more information about the topic, please contact us directly.