Any additional expense to the price of property can make a considerable difference as to its affordability. Buyers must therefore take special care to confirm whether the property they are considering purchasing is subject to Value Added Tax (VAT) and if so, whether the purchase price quoted includes the VAT.
What type of Immovable Property is subject to VAT in Cyprus?
New built residences
Where the planning permit for property was issued following the 1.05.2004 the sale will be subject to VAT at the current rate of 15%. Conversely, if the relevant planning permit was issued prior to the 1.05.2004 no VAT is payable.
Land
The sale of land is currenlty exempt from VAT, although it is expected that this wil exemption will cease in the near the future.
Used residences – “resales”
The sale of used property (i.e. resales) will not attract VAT. The original owner (seller) will have either paid the VAT for the property or the property may have been exempt for the reason stated above.
VAT Refund
Provided that certain conditions are satisfied, a refund may be obtained for VAT paid on property sales. An application must be made to the Ministry of Finance.
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”, which are clasified as properties which have a covered built area of more than 250 m2.
Qualifying for a VAT refund
In order to qualify for a VAT refund the following criteria must be satisfied:
- The property must be the main residence of the applicant, who should not own another second residence on the island;
- The applicant must be 18 years or older and must be an EU Citizen;
- 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.
- It should also be noted that the property must be the a 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:
- Contract of Sale;
- Utility bills proving permanent residency;
- Building permit.
Re-selling the Property
VAT is only payable once upon purchase. No further VAT 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 may attract VAT and the developer will be liable to account for such VAT. However, in the event that the property has been used then it may be considered to be a resale and VAT will not be due.
The above should be used as a source of general information only. It is not intended to give a definitive statement of the law and is subject to the disclaimer.
