VAT on New Residence

The new legislation, enacted on 8 June 2023, sets out the following 2 conditions (square meters and value) that both need to be fulfilled to benefit from the 5% VAT rate:

  • For apartments/houses up to 130 square meters, a VAT rate of 5% shall be imposed. For apartments/houses that exceed 130 square meters and are up to 190 square meters, a VAT rate of 19% shall apply on the square meters exceeding 130 square meters. For apartments/houses that exceed 190 square meters, a VAT rate of 19% shall apply to the whole value.
  • For apartments/houses with a value up to €350.000, a VAT rate of 5% shall be imposed. For apartments/houses with a value that exceeds €350.000 and is up to €475.000, VAT of 19% shall apply on the amount exceeding the threshold of €350.000. For apartments/houses with a value that exceeds €475.000, VAT of 19% shall apply on the whole value. Hence, for apartments/houses over 190 square meters and/or with a value exceeding €475.000, the standard VAT rate of 19% VAT shall apply to the whole value.

It is noted that the current legislation will continue to apply for residences where a planning/building permit application has been duly submitted or a planning/building permit has been obtained up to the end of October 2023 and a 5% VAT application is duly submitted within 3 years from the legislation enactment date.

The current legislation allows individuals to benefit from a reduced VAT rate of 5% (instead of the standard VAT rate of 19%) to be applied on the first 200 square meters of their main residence’s buildable area (purchased or constructed). The buildable area is based on the architectural building plans submitted to secure planning permission. The reduced 5% VAT rate needs to be approved by the Cyprus Tax Authorities by the submission of the relevant application form.

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