New Legislation about Vat on Residential Properties

New legislation about VAT on Residential Properties

New legislation was enforced on October 1st 2011, which enables Cyprus property purchasers to pay as little as 5% on their property purchase as long as the buyer will use the property for their own residential purposes.

This is definitely a positive measure from the new minister Mr. Kazamias and the Parliament who approved it. There is a letter by the VAT office, dated October 7th, outlining the new legislation and not before time either – Cyprus was more than ready to hear positive news in relation to the Property Market.

NOTE: The notification clearly states that any property bought before October 1st 2011 will not be covered under this new provision. Further to that the notification clearly states the following requirements for applicants to obtain approval:

• Applicants should be over 18 years of age
• EU resident or resident in CY jurisdiction
• Applicant should use the property for clearly his/hers residential purposes.
• Planning application should have been after the 1/5/2004
• The property in question should not be more than 275sq. m. and the 5% VAT is only applicable for the first 200sq. m.
• There are special provisions for engineering rooms, storage spaces, covered parking and covered verandas.
• For families over 6 people (minimum 4 children) the 275sq. m. will be increased to 15sq. m. per family member over the 3rd child. I.e. a family with 4 children will have 15sq. m. extra on top of the 275sq. m.

As expected there are some restrictions i.e.:

• Applicants should keep the property for at least 10 years.
• In case the applicants sell the property or evacuate the property before the expiry of the 10 years then they will have to return a certain amount of the money return (in proportion) back to the authorities.

The application must be accompanied with various details and documents, i.e.:

• Planning permission
• Contract of sale (fully stamped)
• Evidence of the above contract/transaction – receipts, payments, etc.
• Verification by the architect about the sq. m. of the property.
• I.D. Card copy and many more details.
  

The applications must be made and delivered and or posted to the VAT offices in each district.

Finally the applicants must prove within six months from the delivery of the property that he/she is really a full resident of the property, using utility bills.