VAT on Property:
For those buildings for which an application for a town planning permit was submitted prior to the 1.5.2004 and for transfers of plots of land, no V.A.T. is charged in the event of an acquisition. For those after the above date, a V.A.T. of 15% is charged, but only once. So if you acquire a property for which V.A.T has been paid previously you will not be required to pay V.A.T. again. V.A.T is not added on the sales price for the purposes of calculating the property transfer fees.
Please note that the Cyprus Parliament has enacted legislation where the standard rate of V.A.T will increase from 15% to 17%, with effective day the 1st March 2012.
Implementation of the reduced VAT rate of 5% on the purchase or building of a permanent residence with effect from 1 October 2011
In the case where certain conditions are met by land developers (LD) and building contractors (BC) as well as by beneficiaries interested in purchasing property, the property disposal will be subject to the reduced 5% VAT rate.
Conditions for the reduced VAT rate to be applied:
For a supply by either a LD or BC to be subject to the reduced VAT rate, the following conditions must collectively apply:
Condition regarding the use
The qualifying residential property is used or is intended to be used by the beneficiary as his/her main and permanent place of residence.
I.e., it does not matter whether the beneficiary is the owner of another property which is being used for other purposes e.g. as a rental or as a holiday house.
Condition regarding the process
The beneficiary must submit a declaration with the Cyprus VAT authorities for certification
If the LD or BC is not provided with a certified declaration (CD), at the time of submission of his VAT return, 15% VAT must be imposed.
Condition regarding the rightful person
For an applicant to be considered a beneficiary, the following requirements must be met:
Be a physical person
At the time of submission of the declaration (on a form specially designed for this purpose), be 18 years of age
Be a citizen of the Republic of Cyprus or of any another Member State of the EU and be a permanent resident in the Republic of Cyprus .
The intention must be to use the property for which the declaration is submitted as the main and permanent place of residence
Condition regarding the property
The application for the planning permission or building permit must have been submitted after 1 May 2004
It must be intended for the property to be used after its purchase or construction as the permanent and main place of residence.
The total area of the property should not exceed 275sq. mts
In the cases of families with more than 3 children, the area is increased by 15sq. mts for every child after the third child
The 5% reduced VAT rate is applied only on the first 200sq. mts
KPMG Service regarding the implementation of 5% VAT on the purchase or building of residential houses:
Assistance with the completion and submission of the Certified Declaration in order for the reduced VAT rate of 5% to applied on the purchase or building of residential houses with effect from 1 October 2011.
For more information please refer to KPMG website www.kpmg.com.cy