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Amendment to the law of reduced VAT rate on permanent residences



 

The House of Representatives recently amended the Value Added Tax Law 119(I) of 2016 which allowed for a reduced VAT rate of 5% levied on first homes. The amending value added tax (VAT) Law Ν.42(I)/2023 was published on the 16 June 2023 in the Official Gazette of the Republic of Cyprus after being passed by the House of Representatives.

 

The revised legislation stipulates that the reduced VAT rate of 5% will be applicable to the initial 130 square metres of constructible residential space within a property, up to a maximum value of €350,000. This applies as long as the overall constructible residential area does not surpass 190 square metres and the total transaction value remains below €475,000. Moreover, as per the previous legislation, the property must be the beneficiary’s permanent residence.

 

Therefore, any residence that surpasses the total cost of 475,000 and the total buildable area of 190 square metres is subject to VAT at 19% for the total cost of the whole buildable area.

 

The new bill further stipulates that for people with disabilities, the reduced VAT rate of 5% will be applicable to the first 190 square metres of buildable residential area.

 

Prior to the amendment, a reduced rate of 5% was applied to the first 200 square metres of the buildable area of the dwelling without a maximum total transaction value.

 

However, a transition period still applies, such that the modified regulations are not applicable if planning permission has been obtained or a planning permission application has been submitted within four months of the commencement date of the amended law.

 

How MPC can assist? 

 

·  Advise on the newly amended VAT provisions in respect of the acquisition of immovable property;

· Liaise with the Tax Authorities to satisfy the compliance with the newly implemented VAT provisions;

·  Assist with the acquisition of an immovable property and advise on VAT implications.

 

The content of this article is intended to provide general information on the subject matter and does not constitute legal advice. For any further information or assistance, please contact Marilou Pavlou by email at info@mpc.legal.com or by phone at +357 22552727.

 

 

 

 

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