From June 16, 2023, revised provisions on the rate of value added tax (VAT) in the Republic of Cyprus came into force. Now the VAT rate is 5% for the purchase or construction of the main and permanent housing.
Key provisions of the new rules:
- A reduced VAT rate of 5% applies to the first 130 square meters of a residence purchased or under construction with a total value of up to 350,000 euros, provided that the purchase price does not exceed 475,000 euros and the built-up area does not exceed 190 square meters.
- A prerequisite for receiving a reduced rate is the use of the property as the main and permanent residence of the owner before the expiration of 10 years.
For your convenience, we have prepared the table below:
|Buildable Area||Purchase Price||Reduced 5% VAT||Standard 19% VAT|
|Up to 130 sqm||Up to 350 000€||On the whole Purchase Price||Nil (zero)|
|Up to 130sqm||350 000€ to 475 000€||On the first 350 000€||On the Purchase Price above 350 000€|
|130-190sqm||Up to 350 000€||On the first 130sqm||On the Purchase Price allocated to the area above 130sqm|
|130-190sqm||350 000€ to 475 000€||Expected to be clarified soon by the VAT Office||Expected to be clarified soon by the VAT Office|
|Over 190sqm||Any||Nil (zero)||On the total Purchase Price|
|Any||Over 475 000€||Nil (zero)||On the total Purchase Price|
New rules on transitional periods:
According to the new provisions, persons who acquire a new main and permanent residence before the expiration of 10 years, and persons who cease to use housing as their main and permanent residence before the expiration of 10 years, are obliged to pay the amount of VAT that relates to the period of unemployment. It is important to notify the VAT Office within 30 days of the date on which the place of residence ceased to be used as the main and permanent residence.
Who can benefit from the reduced VAT rate?
Beneficiaries are persons who:
- Have reached the age of 18 on the date of application for a reduced rate for the purchase or construction of housing.
- Acquire a residence for use as their primary and permanent residence in the Republic of Cyprus.
- Do not have another place of residence in the Republic, as they receive a preferential VAT rate. In the event that a person has received a housing grant under the Special Grant (Purchase or Construction of a House) Act, the person must prove that they have reimbursed the said grant.
The content of this article is valid as of the date of its first publication. It is intended to provide a general guide to the subject matter and does not constitute legal, financial, or any other type of advice. We recommend that you seek professional advice on your specific matter before acting on any information provided.