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VAT Regulations when Buying Property in Cyprus

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

Since that time, VAT has been imposed on the sale of all new property at the rate of 15%. However, a rebate scheme has been introduced enabling certain categories of buyers to claim a refund on certain types of properties.

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

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

The VAT regulations on property sales are as follows:

Sales of land are exempt from VAT although it is anticipated that value added tax will be introduced on sales from 1^st August 2008. It is still unclear on what types of land VAT will be imposed and how it will be collected.

Buyers of custom homes pay VAT at the rate of 15% 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 1^st May 2004.

Sales of resale Cyprus property are exempt from VAT (assuming that the property has been used).

VAT refund scheme

Cyprus introduced the VAT refund scheme to help lower income home buyers. The general provisions of the scheme 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 VAT refund must keep the property for at least ten years, or return the refund.

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

9. The VAT refund 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 refund 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 refund 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.

VAT refund forms

VAT refund forms may be obtained from the following Government offices:

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 rebate scheme. However, the VAT regulations do not permit non-residents, such as property investors, to claim a VAT refund.