Individuals of Cypriot nationality, European citizens, or third country nationals

Only individuals are eligible for such a scheme, as its purpose is to facilitate the acquisition of a property intended to be the primary and sole residence of the applicant.

a) You need to be at least 18 years old when you apply for the reduced VAT. b) You must reside in the property for which you apply for, as your main and permanent residence in Cyprus. c) You or the developer must have applied for a building permit after May 1, 2004. d) If you've already bought a residence with a reduced VAT rate in the past 10 years, you can't apply for the reduced rate unless you've paid back any grants you received. e) You must apply for the reduced VAT, prior to occupying or utilizing the property.

In case of foreigners, official government documents, such as a marriage certificate, must be legalized by apostille under the Hague Convention (or, if not applicable, other relevant treaties or conventions between Cyprus and the country of residence of the applicant). Government document for locals, forms and declarations should be in original. For all other documents copies will suffice.

Where the property is under construction, the application for a reduced VAT rate may be submitted at any time during the construction of the property and where the property will be purchased, the application must be submitted before the first occupation or exploitation of the property by the buyer.

By submitting the application through each applicant’s profile on the VAT department’s online portal (https://taxforall.mof.gov.cy/) with all necessary documentation.

The Law imposed limits towards both size and cost of the new dwelling you wish to acquire. More specifically, the reduced VAT rate of 5% applies to the first 130 square meters of the buildable area, and the total cost must not exceed €350,000. Additionally, the residence cannot exceed 190 square meters of buildable area and a total cost of €475,000. Residences exceeding these limits will be subject to the standard 19% VAT rate for the entire buildable area.

Yes, exceptions are made for individuals with disabilities and families with more than three children. (See for more details the Fifth Annex, Table C, of the Law)

Previously, a 5% VAT rate applied to the first 200 square meters of a residence, with no limit on size or cost. Now, as said above the law imposes limits on both size and cost.

All the amendments to the 5% reduced VAT scheme apply only for dwellings for which a planning permit is issued or an application for a planning permit is submitted to the relevant authority after 31st of October 2023. This means that for dwellings for which a planning permit was applied or obtained prior to 31 October 2023, a reduced 5% VAT rate applies for the first 200 square meters of the buildable area of the dwelling, with no restriction on total meters or cost.

It's essential to recognize that the grant comes with specific conditions and restrictions due to its nature. According to the Law, renting out the property for which you received the 5% VAT is prohibited as it must remain your primary residence. To rent or sell it you must de-register the property from the reduced 5% VAT scheme and return the amount equivalent to the 14% VAT grant, proportionate to the years used within the preceding 10 year period.

Customarily this is evident by the utility bills, namely electricity and water bill but the authorities may, in rare occasions, within the 10 years period visit the property to inspect.

You cannot benefit twice by applying for reduced 5% VAT for two different residences under each spouse’s name. The grant concerns the primary residence per household. If the spouses live together then they have the same primary residence irrespective on whose name, the property was purchased. In fact, VAT Authorities require the spouse to sign the application. These limitations are valid for a set period of 10 years, after which either spouse can reapply for the reduced VAT for a different property.

After 10 years, there is no restriction, and you can re-apply. Before 10 years have lapsed you must de-register the original property from the scheme and return the 14% VAT grant, proportionate to the years used within the 10 year period.

If the individual who has obtained the reduced VAT for their primary residence wishes to rent, sell, or buy another property they must notify the Commissioner of Taxation within 30 days via a relevant letter. Subsequently, they will be required to pay the difference in VAT between the standard and reduced rates proportionate to the remaining period of the 10 years. For instance, if the benefit from the reduced rate is EUR 100,000 at a 14% rate and the individual opts to deregister the property after 7 years, they will need to return 3/10 of the entire amount, i.e., EUR 30,000. After submitting a de-registration application, the individual may reapply for another property, adhering to the prevailing legal and regulatory framework, or rent or sell his property.

The developer or constructor can issue invoices to the applicant with reduced 5% VAT only after they receive the official approval from the VAT authority. Prior to that and in all other cases, 19% VAT must apply in all payments made.

The matter is dealt with contractually, under the sale or construction agreement. In this case the developer or constructor must credit the excess amount paid, up until the date of the approval, in favour of the purchaser, to be used against future payment or to be returned to the purchaser.

The most relevant legislation is the Value Added Tax Laws 95(I)/2000 as amended. There is a also a considerable number of regulations, decisions, instruction issued pursuant to the said law from time to time.

The relevant authority is the Commissioner of Taxation of the Tax Department, and specifically District VAT Office where the property is situated.