Understanding VAT Rates on Property Purchases in Cyprus

The VAT (Value Added Tax) on property purchases in Cyprus is 19% and is typically added to the purchase price. The seller is responsible for collecting the VAT from the buyer on each payment made towards the purchase price and then remitting this amount to the relevant government authority, which is the VAT Department.

According to law No. 73(1)/2012 amendments, when buying new real estate, a reduced VAT rate of 5% is applied instead of the standard 19%. This lower rate allows buyers to save a significant amount when purchasing a home in Cyprus.

VAT rates after property purchase in Cyprus:

• 0% VAT: Applies to the purchase of secondary real estate or new properties from developers with building permits issued before May 1, 2004.
• 5% VAT: Applies when purchasing a first property in Cyprus.
• 19% VAT: This is the standard rate.

Conditions for VAT reduction

To qualify for the reduced VAT rate, the following conditions must be met:

• The buyer must be an individual (not a company) aged 18 or older.
• The property purchased will be the buyer’s primary residence in the Republic of Cyprus.
• The buyer must not have previously purchased any other properties with reduced VAT.
• The property will only be used for personal purposes and not for profit (e.g., rental).
• The 5% reduction only applies to the first 200m² of residential property, as per the approved architectural plan. Any area beyond that will be taxed at the standard 19% rate.

Frequently asked questions bbout VAT when buying property in Cyprus

What does “primary residence” mean?

• The buyer does not need to reside permanently in Cyprus. However, the property must serve as their primary residence when in Cyprus, demonstrating that it is purchased for personal use rather than commercial purposes.

Do I have to pay VAT on resale properties?

• No.

Do I have to pay VAT if I buy a new property?

• Yes.

How is the VAT reduction for residential properties calculated?

• As mentioned, individuals can apply for a VAT reduction from 19% to 5%, but this applies only to the first residential property. This reduction is limited to the first 200m² of the property, and if the area exceeds 200m², the excess will be taxed at the 19% rate.

If I purchase a new property in my company’s name, can I get a VAT reduction?

• No.

Can my spouse and I buy two separate new properties and each apply for a VAT reduction?

• Investors are allowed a VAT reduction only once per couple.

When can I apply for a VAT reduction?

• Applications can only be submitted after the investor has signed the purchase contract and the contract has been submitted to the Land Registry.

To benefit from the reduced VAT rate, the buyer must submit an application to the VAT Department for VAT exemption. Along with the application, a declaration must confirm that the buyer has not previously purchased any property in Cyprus at the reduced VAT rate.

Required documents for application:

• Sales and purchase agreement.
• A copy of the applicant’s passport.
• A copy of the spouse’s passport if the applicant is married.
• Marriage certificate if the applicant is married.
• Architectural plans for the property.
• A statement confirming the appropriate size of the property, certified by an architect or building engineer.
• Notarized copy of the building permit.
• Documentation confirming that the applicant uses the property as their primary residence in Cyprus, such as copies of utility bills, phone bills (Internet), city tax bills, or any other document verifying the use of the property as the primary residence in Cyprus.

These documents must be submitted to the VAT Department no later than six months from the date of issuance and are part of the application for VAT exemption.

What VAT rate will I have to pay if I make a payment to the seller before my VAT reduction application is submitted or approved?

• Typically, investors will need to pay 19% VAT at the time of signing the sale and purchase agreement. After the VAT reduction is approved, the investor must provide the approval to the developer to initiate the process for changing the VAT rate from 19% to 5%.

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