Aktualisierte Mehrwertsteuerregeln für den Immobilienerwerb in Zypern: Ein umfassender Leitfaden

When investing in property in Cyprus, it is crucial to consider the various taxes and fees associated with the purchase. This article provides information on the relevant VAT charges for property owners in Cyprus, although these rates may vary.

Note that this information is for reference, and you should confirm all rates and fees with a licensed financial advisor before proceeding with a sale.

Understanding Property VAT Charges in Cyprus

Since Cyprus joined the European Union in 2004, the Value Added Tax (VAT) was introduced on acquisitions of brand-new properties and of land in Cyprus.

However, the laws in Cyprus allow for a potential reduction in VAT to 5% under certain conditions:

1. The property is brand new.
2. The buyer intends to use the property as their primary residence for a period of at least 10 years.
3. It is not being purchased for investment purposes.

These conditions used to apply to the first 200 square meters of the property. For anything beyond this, the standard VAT rate of 19% applies.

The resale transactions of immovable property where the property has already been used are not subject to VAT.

Recent Amendments to the VAT Law on the Application of 5% VAT

The House of Representatives passed the amending bill concerning the applications of the reduced rate of VAT of 5% on the acquisitions of a brand new primary residence.

According to the new provisions of the VAT Law, the reduced rate of VAT will apply to the first 130 square meters of a buildable residential area, based on the building factor and architectural plans presented to get a planning permit, up to a property value of €350,000, provided the total transaction does not exceed €475,000 and the total buildable area is no more than 190 square meters.

Individuals with a disability, which fall under the definition of “individuals with disabilities” under the VAT Law, can apply for reduced rate of VAT of 5% to the first 190 square meters of buildable residential area, regardless of the total buildable area of the residence.

In Summary

When purchasing a new property in Cyprus, the buyer has to pay 19% on the purchase price.

The buyer can request a VAT rate reduction with the VAT Authority, from 19% VAT to 5% VAT, but only if the buyer uses the property as their own residence (including their family) and not as an investment (i.e., for short-term or long-term rental income). The buyer should also maintain the property for a period of 10 years from the date of issuing the VAT reduction permission to keep the VAT discount.

On the 6th of June 2023, the Cyprus Government amended the VAT registration legislation. The new rules took effect on 16 June 2023 and are as follows:

1. Der reduzierte Mehrwertsteuersatz von 5% gilt für die ersten 130 Quadratmeter eines Hauptwohnsitzes, vorausgesetzt, dass die gesamte bebaubare Fläche 190 Quadratmeter nicht überschreitet.
2. Vorausgesetzt, dass der Wert bis zu €350,000 beträgt und der gesamte Transaktionswert €475,000 nicht überschreitet.

There is an exception to the above rules for individuals with disabilities if they fulfill the criteria of what is considered a person with disability according to the VAT Law.

Before the legislation changes, the reduction used to apply for the first 200 square meters of a property. For properties over 200 square meters, part of the price was paid with 5% VAT and another part with 19% VAT.

The old rules will continue to apply until 31 October 2023 if the buyer applied for planning permission for the property prior to the enactment of the new Law.