Reduced VAT on first homes in Cyprus

Cyprus Parliament passed a law on 8^th June 2023 approving a reduced VAT rate of 5% for primary residence, under specified conditions, including but not limited to:

• Reduced VAT rate is applicable for the first 130 m² of a primary residence, either a house or an apartment, with a value of up to €350,000.[1]
• The transitional period, during which the proposed regulations will not apply in cases where urban planning permission has been obtained or an application has been submitted within 4 months from the effective date of the law.

The law has been passed following the issuance of the reasoned opinion by the European Commission to Cyprus for failing to correctly implement the EU VAT rules for dwellings purchased or constructed in Cyprus, since the reduced VAT of 5% for primary dwellings in Cyprus was, until recently, applicable for the first 200 m² without imposing any additional limitations.

For more information and/or advice, please contact us via email at [email protected]

[1] The law includes a provision allowing reduced VAT on the first 190m² of a constructed area for individuals with disabilities.