On 8 June 2023 the Cyprus Parliament approved the bill on the application of a 5% VAT rate on the purchase or construction of a property to be used as the main and permanent residence by the buyer/s.
Under the current legislation, individuals are eligible of a VAT rate of 5% instead of the standard rate of 19%, on the first 200 square meters of the buildable area of such a property. The buildable area is determined on the architectural plans, based on which planning and other construction permits are obtained. The reduced VAT rate needs to be approved by the Cyprus Tax Authorities by the submission of the relevant application form.
The current legislation will continue to apply for properties for which a permit has been obtained or an application for permit has been duly submitted by the end of October 2023 and an application for a reduced VAT rate is duly submitted within 3 years from the date the legislation was enacted.
The newly enacted legislation provides for the following conditions to be satisfied for a reduced 5% VAT rate to apply.
Special provisions apply to disabled persons and large families.