5% reduced VAT problem with buying a plot and building independently

Before it's been built or during the initial stages of construction
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Vendela
Posts: 18
Joined: 01 Dec 2022 14:53

5% reduced VAT problem with buying a plot and building independently

Post by Vendela »

Hello Dear community,

Thank you for having me!

We are just in the process of buying a plot and it would be our permanent home in Cyprus. It says, that there is a reduced VAT of 5% for the first property, but it seems, this only applies, when bought from a developer and the house is already built. Individuals have to apply for reduced VAT after they moved in and lived there for 6 months, which might be tricky because of financing the VAT in the meantime and the law will change too. Who had the same problem and could help us here please?

Also when will this law be changed, are there any news? It should have changed some time ago, but I can't find information about this.
Nigel Howarth
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Re: 5% reduced VAT problem with buying a plot and building independently

Post by Nigel Howarth »

Hello again Vendela

VAT is complex and it depends who you buy it from (a private individual or a company). You'll find some information on how the VAT on land is calculated at What is the VAT rate for Land in Cyprus?.

As you say, if you the build on the land, you will pay the full 19% VAT. But after you've lived in the house for 6 months you may be able to claim back 14%. You'll find information about this at Application of the reduced VAT rate (5%) on the Purchase/ Construction of a New Dwelling in the Republic.

It's very likely that the law will be changed as Cyprus has been bending EU VAT rules as the reduced rate is only applicable as part of a social policy. The matter is still under discussion; I have no idea when it will be resolved. (Also, the EU started infringement proceedings against Cyprus for its failure to properly apply EU VAT rules for dwellings.)

Regards
Nigel Howarth
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Pantheman
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Re: 5% reduced VAT problem with buying a plot and building independently

Post by Pantheman »

The vat can be 5% before you build. Your builder will have to apply for this reduced rate. It is done via his accountant. You do not have to finished building and move in.

I have family that built with the reduced rate before the construction was completed.

As your prospective builder about this.
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Nigel Howarth
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Re: 5% reduced VAT problem with buying a plot and building independently

Post by Nigel Howarth »

Thanks Pan

I've looked through the reduced VAT information leaflet - "If the property is under construction (off-plan) the reduced VAT rate application can be submitted at any time during the construction of the dwelling. In cases of purchasing new-build properties the application must be submitted before the first occupation of the dwelling by the buyer."

Cheers,
Nigel Howarth
Independent information & advice for Cyprus property buyers
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Vendela
Posts: 18
Joined: 01 Dec 2022 14:53

Re: 5% reduced VAT problem with buying a plot and building independently

Post by Vendela »

Thank you for your answers. It is a bit depressing, that individuals are less lucky than developers.
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