Amendment to the VAT of Primary Residence

We wish to inform you of a piece of legislation recently passed by the Cyprus Parliament that could significantly impact your future property investments in Cyprus.

Specifically, on the 8th of June, the Cyprus Parliament approved new legislation that introduces adjustments to the Value Added Tax (VAT) applied to the purchase of primary residence (whether a house or apartment), moving from a blanket 5% VAT rate on the first 200m² as it was until now, to a more nuanced system.

The new system stipulates that a reduced 5% VAT rate will be applied on the purchase or construction of the primary residence, provided that specific conditions are simultaneously met, regarding the residence’s size and value. Let’s break these down:

• Size: the first 130m² of the residence will be subject to the reduced 5% VAT. For residences exceeding 130m² but less than 190m², the exceeding area over 130m² will be taxed at the standard 19% VAT rate. Lastly, for residences exceeding 190m², 19% VAT will apply to the whole property. 
• Value: the first €350,000 of the residence will be subject to the reduced 5% VAT. For residences exceeding €350,000 but less than €475,000 the exceeding value over €350,000 will be taxed at the standard 19% VAT rate. Lastly, for residences exceeding €475,000 in value, a full 19% VAT will apply on the whole property.

It's important to note that these changes come with a transitional period, during which the new regulations will not apply where a planning/building permit was issued before the end of October 2023 and the VAT application was submitted within 3 years from the enactment from the legislation.

The legislative changes in Cyprus, driven by the European Commission's guidelines, underscore the importance of informed decision-making when investing in property. We want to assure you that we're here to help and support you in navigating these changes.

Should you wish to discuss this new legislation and what it means for your investment plans, please do not hesitate to contact us. We are here to provide you with the expert guidance you need to make the best investment decisions in this changing landscape.

* This publication has been prepared as a general guide and for information purposes only. It does not purport to be comprehensive or to render professional advice. Before making any decision or taking any action that may affect you and/or your business, bespoke advice should be obtained.