VAT at a reduced rate of 5% instead of 18%

Payment of VAT at a reduced rate of 5%

It applies to all foreign nationals (European and third country nationals)

1. The terms under which a buyer is entitled to a 5% VAT in general lines are as follows:

(a) The Property is under construction or completed and subjected to VAT (All buildings for which the town planning application was submitted on or after the 1/5/2004 are subjected to VAT).

(b) The Property is designated to be used as the residence of the buyer in Cyprus.

(c) The Property bought has not been used before.

(d) It must be used (in the case of ready made property) or intended to be used (in the case of property under construction) as the main and permanent place of residence of the buyer in the Republic (the buyer is not required to make Cyprus his/her permanent residence, but only to use the property as permanent space of residence, when in Cyprus).

(e) The VAT reduction applies only to the first 200 sq.m. of houses which do not exceed 275 sq.m.

(f) The applicant must not have another property as permanent residence in Cyprus.

(g) Applicant must submit an application and attach among other

i. Contract of Sale in case or purchase or a Contractors Contract in case of building a house (in the latter case a declaration by the building contractor is submitted that he is licensed to build the house).

ii. Proof of ongoing construction in case of building a house

iii. Architectural plans

iv. Proof that the applicant is using the house as a place of residence such as various bills. In the case of houses under construction, the bills or other proof of use must be presented within 6 months from the date of possession of the house.

v. Any other supporting data.

2. A copy of the application certified by the Authority to which it was submitted, is delivered to the seller or the building contractor, as the case may be, who is obliged to apply thereon the reduced VAT of 5%.

3. In any case that it is subsequently revealed that the applicant was not entitled to a reduced VAT, such person must pay the full amount of VAT.

4. In any case that the entitled person ceases to use the house as a place of residence at any date before the completion of a 10 year period, such person must within 30 days from such date inform the VAT Director and to pay the amount of VAT corresponding to the part of the 10 years period during which the house was not used as the place of residence.

Non-Payment of Transfer Fees or Payment of 50% of Transfer Fees

It applies to all foreign nationals (European and third country nationals)

1. Transfer fees are paid when a property (house, flat, shop, office, land) or rights thereon are transferred from one person to another and are a percentage on the value of the right transferred, as specified in the relevant contract or in certain cases by the Lands Office.

Transfer fees are as follows:

Value of Property Fees

€1 – 85.430 3%

€85.431 – 170.860 5%

€170.861-upwards 8%

2/12/2011 – Α new law was introduced in Cyprus which provides the following:

No transfer fees will be paid in case that VAT was paid for the same sale of the same immovable property and such sale is made between the 2/12/2011 and 31/12/2014. Reduction to 50% of the transfer fees in case where VAT was not paid but the following terms and conditions apply:

(i) It is the first sale of such property registered with the Land Registry Office after the issuing of the Town Planning Permission or the Building Permit.

(ii) The relevant Contract of Sale has been signed and deposited for specific performance to the District lands office within the period from 2/12/2011 until 31/1/2014.

If the above (a) and (b) conditions are fulfilled, the date of actual transfer of the property may take place at any time.