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 property intended to be the primary and sole residence of the applicant. Companies and other legal entities are not eligible.

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 are applying, 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.

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

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 applicant’s country of residence). Government document for locals, forms and declarations should be in original form. For all other documents, copies will suffice.

Individuals must first register on the Tax For All portal and either apply for a Tax Identification Code (TIC) number or link their existing one to their account. This can be done personally or through a duly appointed legal representative. After registering they can submit the application for the reduced 5% VAT rate online. Once submitted, the application is reviewed by the Tax Department, and approval typically takes about one month.

If the property is under construction, the application for the reduced VAT rate may be submitted at any time during the construction. If the property will be purchased, the application must be submitted before the buyer’s first occupation or exploitation of the property.

The Law imposes limits on both the size and cost of the new dwelling you wish to acquire. 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 or a total cost of €475,000. Residences exceeding these limits will be subject to the standard 19% VAT rate on the entire buildable area.

Yes, exceptions are made for individuals with disabilities and families with more than three children. Specific advice should be sought from a tax advisor or other qualified professional.

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

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

It's essential to recognize that the grant comes with specific conditions and restrictions due to its nature. Renting out the property for which you received the 5% VAT is prohibited, as it must remain your primary residence. To rent or sell the property, you must de-register it 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 bills, but the authorities may, on rare occasions, visit the property to inspect it within the 10 year period.

You cannot benefit twice by applying for the reduced 5% VAT scheme 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 of whose name the property was purchased under. 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 reapply. Before 10 years have lapsed you must deregister the original property from the scheme and return the 14% VAT grant, proportionate to the years used within the preceding 10 year period.

No, the 5% VAT rate applies only to the construction cost of the property and does not extend to the cost of furniture or appliances.

If the individual who has obtained the reduced VAT for their primary residence wishes to rent, sell, or buy another property before 10 years have lapsed from the acquisition, 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 €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 total amount, i.e., €30,000. After submitting a deregistration application, the individual may reapply for another property, adhering to the prevailing legal and regulatory framework, or rent or sell their property. This process can be completed electronically through the Tax For All portal.

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

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

There is no requirement to permanently reside in Cyprus in order to be eligible. However, strictly speaking, if you reside permanently abroad, then the authority may challenge whether the property is your "primary" residence. In other words, you can still benefit from the reduced 5% VAT scheme even if you live abroad, as long as the property purchased under the scheme serves as your primary residence. If the authorities, based on their tasks, investigation, suspicion, or deductions, determine otherwise, you may be asked to return the 14% benefit or part thereof.

Yes, you can. Owning many other properties in your name (or in the name of your spouse), does not disqualify you from being eligible to apply for the reduced 5% VAT when buying property, provided that you are otherwise eligible, namely that it will be used as your primary residence, and that you did not apply for or receive such a benefit for another property in the past 10 years. If you did apply for and receive the said benefit for another property, you can still benefit from the reduced 5% VAT on the new property to be purchased, provided you de-register the old property and return the amount corresponding to the 14% VAT benefit, proportionately to the years in use over the total 10 year period.

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

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