VAT on Cyprus Property
New built property sold in Cyprus may be subject to V.A.T.
Any additional expense to the price of the property can make a considerable difference as its affordability. Buyers must therefore take special care to confirm whether the property they are considering purchasing is subject to V.A.T. and if so, whether the purchase price quoted includes the V.A.T.
What Property is subject to V.A.T?
New built residences?
Where the planning permit for property was issued following the 1st of May 2004 then the sale will be subject to V.A.T. at the current rate of 15%. Conversely for the sale of property whereby the relevant planning permit was issued prior to the 1st of May 2004 no V.AT. is payable.
Land
Sales of land are exempt from V.A.T. although it is anticipated that this will be changed at some stage in the future.
Used property – Resales
Sales of used property (i.e. resales) will not attract VAT.
V.A.T. Refund
Under certain circumstances, where V.A.T. is paid on property sales, a refund may be obtained following an application to the Ministry of Finance.
In the case where VAT is chargeable, there is special provision for a refund in the case of first time buyers and legal advice should be sought as to whether this provision is applicable and an application can be made.
In the case of a purchaser’s first private residence then a refund of maximum 10% of the VAT paid on the property may be claimed back from the local authority. It should be noted that the full amount needs to be paid first and then the refund is applied for at a later stage, however the process effectively allows for a lower rate of 5% to apply to this category of buyers.
The actual value of the refund is made according to a calculation which takes into account the area of the property, the type of property and the cost of build per square meter.
The refund does not apply to ‘‘luxury properties’’, these are properties which have a covered area of more than 250m2
Qualifying for a V.A.T. refund
In order to qualify for a V.A.T. refund the following criteria must be satisfied:
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The property must be the main residence of the applicant, who should not own another second residence on the island;
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The applicant must be 18 years or older and must be an EU Citizen;
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The applicant must be permanently resident in Cyprus (i.e. reside in Cyprus for no less than 186 days per year). A utility bill should be presented with the application in order to prove this.
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It should also be noted that the property must be the residence for at least ten years (if it is not then you will be liable to refund the payment proportionally according to the amount of time spent in the property );
Applying for a VAT Refund
An application will be made on the Ministry of Finance form and will need to be accompanied by:
Re-selling the Property
V.A.T. is only payable once upon purchase. No further V.A.T. is charged on resells.
Special consideration should be given to resale properties, which are sold under a cancellation and resale agreement, before the original purchaser had the opportunity to use the property. In such cases, the purchase will attract V.A.T and the developer will be liable to account for such. In the event that the property has been used then it will be considered to be a resale and V.A.T. will not be due.
The above should be used as a source of general information only.
