VAT ALLOWANCE AS PER VAT LAW NO. 73(I)/2012 (AS AMENDED)

The reduced rate of 5% applies for residences which are used or intended to be used as the primary and permanent place of residence.

Granted for:

  • The purchase of a brand-new building or part of it, the sale of which bears VAT. (The application for the planning permit was deposited after 1st May 2004.)  The normal VAT rate as from 14/01/2014 is 19%.
  • The property constitutes the main and permanent residence and the applicant does not have another residence in Cyprus, i.e., the residence in question is his main and permanent residency.  An official declaration is deposited by the applicant to the VAT Authority.
  • The approval is granted for a period of 10 years

Who is Entitled:

The applicant should be:  

  • Over 18 years of age on the date the application was submitted;
  • Citizen of the Republic of Cyprus or of any other member state of the European Union and should reside permanently in Cyprus and non EU citizens.

Extent of property

The allowance is granted for the first 130 sq. m. of buildings (apartments or houses) based on the structural factor which is estimated from the relevant authorities, up to the value of €350.000 provided the total transaction value does not exceed €475.000 and the total construction area does not exceed 190sq.m. It is clearly understood that in the event the property is more than 130sq. m, the applicant will pay 5% VAT on the first 130 sq. m of the building and 19% VAT for the remaining extent of the property as per the architectural plans.

Sale of property

In the event the applicant will sell the main residence before the expiration of a period of 10 years from the date the approval was granted and will not apply for a VAT reduced rate for another property within ten years from the date the approval was granted, the applicant should proceed with the following:

  1. Notify the VAT Authority that the property was sold within 30 days from the effect of such a sale, and
  2. Refund to the VAT Authority the balance of the VAT refund which will be estimated, based on the remaining period from the date the use of the property is interrupted, until the completion of the 10 years period.

It is clearly understood that in the event an applicant who has refunded to the VAT Authority part of the VAT refund as per the above calculation and proceeds with the purchase of another main residency property for which the applicant will apply for the reduced rate VAT before the expiration of the 10 years period, the applicant is obliged to refund to the VAT Authority totally the full VAT refund amount that was initially granted in accordance with the first application.

Second residential property

The applicant who has been granted a VAT allowance for the first property is allowed to apply for a VAT allowance for the purchase of another property provided that:

  1. the property for which a VAT allowance has already been granted as the main residence has ceased to be used and the applicant has informed the VAT Authority accordingly.
  2. the full VAT allowance that was granted at the time of the approval of the application for the first property (i.e. 14% VAT allowance) will have to be refunded in full to the VAT authority.

The equivalent amount is refundable to the VAT Authority for any part of the ten-year period if the use of the property for permanent residence is interrupted, except in case the property is transferred to the applicant’s children over 18 years of age.

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