VAT regulations relating to property

VATPrior to Cyprus' accession to the European Union in 2004, the supply of immovable property was exempt from Value Added Tax (VAT).

Since that time, the law has changed and VAT has been imposed on the sale of all new property at the current rate. However, a special grant scheme has been introduced enabling certain categories of buyers to recover some of the VAT they have paid.

The VAT grant application forms are available at a number of Government offices, the addresses of which are listed at the bottom of this page.

NOTE. In August 2011, a proposal was put forward to reduce the amount of VAT payable by first-time buyers.

The proposal was that first-time buyers, whose residences are less than 250m2, will pay VAT at the rate of 5%.

If agreed by government and passed into law this is good news for those who purchase property after the changes are implemented. They will no longer have to pay 15% VAT and then claim 10% back using the 'Special Grant for purchasing a building or residence' process described below.

On what type of property do you pay VAT and at what rate?

The VAT laws relating to the acquisition of property in Cyprus are as follows:

  • Sales of land are exempt from VAT although it was anticipated that value added tax would be introduced on sales from 1st August 2008, the Cyprus Government negotiated a delay and it will now be introduced on 1st January 2009.
  • Buyers of custom homes pay VAT at the current rate on the construction costs (this has always been the case).
  • Those who are buying a home from a property developer are liable for VAT if the application for a Town Planning Permit was submitted after 1st May 2004.
  • Sales of resale Cyprus property are exempt from VAT (assuming that the property has been used).

Special grant for purchasing or building a residence

The Cyprus Government introduced a special grant scheme enabling lower income home buyers to recover some of the VAT they have paid. The general provisions of the law (Law N.91(I)/2006) are as follows:

  1. The purchased property is the sole main residence of the applicant.

  2. The applicant does not own any other property in Cyprus that is used as a main residence.

  3. The applicant should be at least 18 years of age and must be an EU citizen.

  4. The applicant must be permanently residing in Cyprus.

  5. The applicant should fill in a special form issued by the Ministry of Finance and a statement must appear in the government’s Gazette that this property is a first home.

  6. The application must be accompanied by a copy of the contract, a copy of the building permit (the same as the ones submitted to the Land Registry) evidence of the applicant’s residence, such as copy of a phone bill, copy of a water bill, copy of the electricity bill, copy of the sewage bill and any municipality’s tax bills.

  7. In order to qualify, those who receive the grant must keep the property for at least ten years, or inform the Ministry of Finance and return a proportion of the grant. (This condition, however, does not apply when transferring ownership of the property to children or in case of death of the beneficiary).

  8. Properties with a covered area greater than 250m2 do not qualify for a grant. (The Cyprus government considers that those buying a larger home can afford to pay the VAT in full).

  9. The VAT grant is calculated on basic area, but for every family with more than three children, there is an additional provision of 15m2/child.

  10. In addition to the 130m2:

Up to 36m2 is allowed for covered parking

Up to 5m2 for an engine/boiler room

Up to 7m2 for storerooms

Up to 40m2 for covered verandas

The amount of the VAT grant will depend on the type of the property and its size, based on the 130 m2 calculation.

The amounts of the grant valid from 1 January 2008 are as shown in the table below:

  1. Construction of house € 10,131.13.

  2. One bedroom apartment € 19,249.28.

  3. Two bedroom apartment € 19,249.28.

  4. Three bedroom apartment € 17,729.63.

  5. Semi detached house € 15,196.87.

  6. Detached house € 20,262.38.

The VAT grant is calculated by taking the area of the house/apartment, multiplied by the purchase price per m2 multiplied by Value Added Tax rate of 15/115 and multiplied by the 10/15 refund rate.

Value Added Tax grant application forms

VAT grant application forms may be obtained from the following Government offices or you can download one by clicking here:

Larnaca

District Administration Office
19-21 Constantinos Paleologos Street
P.O. Box 40103
6301 Larnaca
Tel: 24 801818
Fax: 24 304635

Paphos

District Administration Office
5 Nikodemos Mylonas Street
8100 Paphos
Tel: 26 801 101
Fax: 26 306 251

Limassol

The Citizen Service Centre, which is located near the Old Port.
Tel: 25 829129

Nicosia - From one of the following:

Ministry of Finance
Citizen Service Centre

Tel: 22 450190 for further information.

Under Cyprus' VAT regulations, those buying property in Cyprus may be able to recover some of the VAT they have paid through the grant scheme.

Please note that the special grant is not available to non-residents.