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Cyprus Property - Reduced VAT On Purchase Of New Build Property

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Limassol Apartment Block

To Whom Does It Apply?

In order to succeed in your application for reduced rate VAT you must be:
-    18 years or older; AND
-    A Citizen of the Republic of Cyprus or another EU Member State; AND
-    A permanent resident of the Republic of Cyprus.
Furthermore the residence in respect of which you are applying for the reduced rate of 5% must be your main residence.
Married couples may only apply the reduced rate to one residence and not one residence each.

To Which Properties Does the Reduced Rate Apply?

In order to qualify, the purchased property must:
-    Be a new build which had its building permit granted after 1st April 2004;
-    Not exceed 275m² *
* Note that the reduced rate will only apply in respect of the first 200m² of the property and anything above 200m² will be subject to the higher rate of VAT at 15%.  Furthermore special provisions apply for large families (with more than three children) permitting an extra 15m² for each additional child.

How to Apply

The reduced rate VAT needs to be pre-approved which means that a purchaser of a new property in Cyprus will need to complete the relevant documents for the VAT authority and a decision will be made as to whether that person qualifies by them on a case by case basis.  Whilst this does not guarantee predictability, the rules are sufficiently clear to allow your legal/tax advisor to give you a good idea of whether your purchase will qualify.

Post Application

The rate of 5% will only apply to people who live in the property for 10 years and in the case that a person does not reside in the property for the full 10 years, a formula is applied to calculate a proportionate payment.
Six months following the completion of the property, the new owner will need to submit evidence to the VAT authority (in the form of utility bills or similar) to prove that the property has been his main residence for the previous six months.

Conclusion

The new legislation serves to offer a good incentive for Cypriot citizens and citizens of EU member states to purchase property on the island and should help to boost the property market on the island making it an excellent time to invest in property here.

© Louise Zambartas

More Cyprus Information

Department Of Land And Surveys Citizens Charter

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PROPERTY FINDERS SERVICE   MARKETPLACE CLASSIFIEDS   UK BUSINESS DIRECTORY  

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