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VAT  Regulations & Refunds in Cyprus


 On June 8, 2012 by force of law of the Republic of Cyprus № 73 (1) / 2012, amending the Law on Value Added (VAT law) of 2000, under the new law, from now on the acquisition of real estate not only the citizens of the Republic of Cyprus or the EU and third country nationals will be charged a reduced rate of VAT of 5% instead of the current rate of 17%. Thus, the buyer the opportunity to substantial savings when buying property in Cyprus.

Requirements for the property and the applicant
Reduced rate of VAT is granted subject to the following requirements:

1. The applicant must be a natural person (not juridical entity)
2. Applicant (the buyer of real estate) must be at least 18 years of age
3. This property must be the primary residence of the applicant in the Republic of Cyprus. Under a property in this context is understood as the home and office, as well as cases where the buyer is building a house.
4. The applicant should not be another property in Cyprus, acquired earlier with a reduced rate of VAT
5. Property must be used exclusively as a residential property, and the applicant must be the first to come into actual possession of the rights of the property from the time of completion.

The law applies to the first 200 sq.m. residential property, provided that the total area of the property does not exceed 275 square meters, according to the architectural plans filed with the official authorities of the Republic of Cyprus to the building. That is, if the total area of the property is, say, 300 square meters, the low rate of VAT does not apply, and the buyer will have to pay for the acquisition of the full VAT rate of 17%.
Checklist for a reduced rate of VAT

An applicant applying for a privilege tax, VAT applies to the Department of the Ministry of Finance of the Republic of Cyprus the following documents:

a) A statement of the declaration that the applicant did not acquire any other property in Cyprus with the use of a reduced rate of VAT;
b) The application shall be accompanied by:
i) The contract for the purchase of real estate
ii) Architectural plans for real estate
iii) A marriage certificate, if the applicant is married
iv) A copy of passport
v) Copy of passport / her spouse, if the applicant is married
vi) A certified copy of the permits for construction
vii) initialed by the architect or engineer in civil engineering declaration confirming the appropriate size of the property
viii) Documentary evidence that the applicant uses the property as his place of residence in Cyprus, such as:

- A copy of telephone bills
- Copy of water bills
- Copy of the electricity bill
- A copy of the accounts for the local or municipal taxes
- Any other documents to prove that the property is used by the applicant for its intended purpose, as a principal residence in Cyprus.

The above documents must be submitted within six months from the date of acceptance of the property the applicant and are part of the application for the use of the VAT exemption.

c) In cases where the applicant is married, the husband / wife also must apply to the declaration on the absence of his / her property in Cyprus
d) If the applicant, which the authorities have approved reduced rate of VAT do not use a property is less than 10 years from the entry into ownership, he shall within 30 days notify the Department of Finance and Tax proportionately pay the difference between the reduced and standard VAT rate existing at the time of the contract.

VAT refund procedure
The applicant initially pays VAT at the standard applicable at the time of the contract, and the rate indicated in the contract for the purchase of real estate. As of June 8, 2012, it is 17%. Further, the applicant applying for a VAT exemption (benefit) sign a declaration and submit an application to the appropriate government department, as described above. After the VAT department confirms the validity of the applicant to provide a benefit, VAT (proportionally, in the context of the first 200 square meters of residential real estate) is recalculated at a reduced rate, which at the time of adoption of the law – 06/08/2012 – 5%