Cyprus offers a reduced Value Added Tax (VAT) rate of 5% for individuals purchasing their first primary residence, aiming to make homeownership more accessible. This incentive is particularly beneficial for first-time buyers planning to reside permanently in Cyprus.

✅ Eligibility Criteria for the 5% VAT Rate

To qualify for the reduced 5% VAT rate, the following conditions must be met:

  • Primary Residence: The property must be intended as the buyer’s main and permanent residence in Cyprus.
  • Individual Buyer: The applicant must be an individual (not a company) aged 18 or older.
  • Property Specifications:
    • Value: The property’s value should not exceed €350,000.
    • Total Transaction Value: Must not exceed €475,000.
    • Size: The total covered area should not exceed 190 square meters.
    • Reduced VAT Application: The 5% VAT rate applies to the first 130 square meters of the property.
  • Usage Restrictions:
    • Non-Commercial Use: The property must not be used for commercial purposes, such as renting or leasing.
    • Minimum Occupancy Period: The buyer must reside in the property for at least 10 years.

Note: Individuals with disabilities are entitled to the 5% VAT rate on the first 190 square meters, regardless of the property’s total size or value.

📝 Application Process

To apply for the reduced VAT rate:

  1. Contract of Sale: Ensure the contract is signed and stamped.
  2. Payment Evidence: Provide proof of payment to the developer or constructor.
  3. Application Submission: Submit the application to the Cyprus Tax Department before taking possession of the property. Applications must be submitted electronically via the “Tax for All” (TFA) portal.
  4. Required Documents:
    • Copy of Passport or ID
    • Marriage Certificate (if applicable)
    • Application Form
    • Planning/Building Permits
    • Architectural Plans
    • Residence Permit (if applicable)
    • Stamped Contract and Payment Receipt
    • Contractor’s License

⚠️ Important Considerations

  • Transitional Provisions: For properties with planning permits issued or applications submitted by October 31, 2023, the previous scheme applies, allowing the 5% VAT rate on the first 200 square meters, irrespective of the property’s total value or size.
  • Change in Use or Sale: If the property is sold or its use changes within the 10-year period, the buyer may be required to repay the VAT benefit proportionally.

📌 Conclusion

The 5% VAT scheme presents a valuable opportunity for first-time buyers in Cyprus to reduce the cost of acquiring a primary residence. By understanding the eligibility criteria and adhering to the application process, buyers can take full advantage of this incentive.

For personalized advice and assistance with property purchases in Cyprus, feel free to contact our team at CyprusHomes.Online.