NEW RULES REGARDING REDUCED RATE OF VAT 5% FOR RESIDENTIAL PROTPERTY
The Cyprus Parliament voted on the amendment of the Law of Value Added Tax of 2000 (95 (I)/2000), specifically regarding the requirements under which the reduced rate of VAT at 5% is granted to individuals purchasing their first property in Cyprus for their residence.
The following amendments of the Law have been approved:
1.Grace Period under which the old criteria remain in force:
The amended Law includes a provision granting a three-year grace period, under which the old criteria for the reduced VAT rate are applied, provided that:
1. the property has a Planning Permit or
2. a Planning Permit Application has been filed by the 31st of October 2023
2. New conditions for the reduced VAT rate:
a. For property of value above €475.000 and total covered area[1] more than 190㎡ the VAT rate will be 19%.
b. For property of value up to €475.000 and total covered area up to 190㎡ 5% VAT rate will be applied for the first 130㎡ until the value of €350.000 and for the remaining covered area (60㎡) of the property until the value of €475.000, 19% VAT will be applied.
c. For property of value up to €350.000 and total covered area up to 130㎡, 5% VAT rate will be applied.
[1] Covered area does not include covered verandas.
| VALUE OF PROPERTY | COVERED AREA | VAT |
| €475.000 < | 190㎡ < | 19% |
| €350.000 – €475.000 | until 190㎡ | 19% |
| €0 – €350.000 | 130㎡ | 5% |
It is clarified that both criteria regarding the value and the covered area of the property must be met in order to apply for the reduced rate of VAT.
The law also provides a special clause for persons with disability, who can apply for the reduced VAT rate for the first 190sq.m. covered area of their property, regardless of the total area of the property.