A standard VAT rate of 19% is required to be paid when buying a new property in Cyprus.
However, following a recent VAT Amendment Law, a reduced VAT rate, starting from 5%, is applicable for the acquisition of new residential properties.
For the reduced rate to be in effect, certain terms and conditions must be met:
The reduced VAT rate of 5% is applied on the first 200 square meters of the property as per the architectural plans submitted to the Authorities. On the remaining square meters, the standard rate of 19% is imposed.
In case that the owner wishes to sell or rent the property before the lapse of 10 years, the difference in VAT 19% and 5%, will require to be paid on a pro-rata basis for the remaining 10 years.
In the event that the purchaser has acquired more than one property, the purchaser can change the main residence from one property to other before this second residence has been delivered.
It is worth to be noted that the reduction of VAT to 5% is only available to individuals. However, in case that the legal entity which buys a real estate can only claim back the VAT paid if the activities of this legal entity encompass trading in real estate or of the property is use as the entities offices.
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