VAT Regulations & Refunds When Buying Property in Cyprus
Cyprus applies Value Added Tax (VAT) on certain property purchases, depending on the type of property, its use, and the buyer’s circumstances. Understanding these rules helps buyers plan their finances and avoid surprises.
1. When VAT Applies to Property Purchases
VAT applies only to new properties purchased from a developer.
Resale properties (second‑hand homes) are exempt from VAT.
VAT Rates
- 19% Standard VAT
- 5% Reduced VAT (for eligible primary residences)
- 0% VAT on resale properties
2. The 5% Reduced VAT Rate (Primary Residence)
Buyers can benefit from a reduced 5% VAT rate if the property will be used as their main and permanent residence.
Eligibility Criteria
- Buyer must be an individual, not a company
- Property must be used as the primary residence for 10 years
- Buyer must not have used the reduced VAT rate before
- Property size limits apply
Property Size Rules (as of 2024–2026 framework)
- Up to 130 m² → 5% VAT
- 131–190 m² → 19% VAT applies proportionally
- Above 190 m² → Entire property taxed at 19%
Documents Required
- Application to the Tax Department
- Architectural plans
- Contract of sale
- Declaration of intended use
- Proof of family composition (if applicable)
3. When VAT Is 19%
The standard 19% VAT applies when:
- The property is new and purchased from a developer
- The buyer does not intend to use it as a primary residence
- The buyer is a company
- The property exceeds the size limits for reduced VAT
- The buyer has already used the reduced VAT benefit on another home
4. VAT on Land Purchases
VAT may apply to land purchases if:
- The land is intended for development
- The seller is a VAT‑registered company
- The land falls within a development zone
Otherwise, many land transactions remain VAT‑exempt.
5. VAT Refunds in Cyprus
Cyprus offers VAT refunds in specific situations. These are important for investors and developers.
5.1 VAT Refund for Non‑EU Buyers (Primary Residence)
Non‑EU buyers do not receive VAT refunds, but they can apply for the 5% reduced VAT if the property is their main residence.
5.2 VAT Refund for Companies & Developers
A VAT refund may apply when:
- A VAT‑registered company buys property for business use
- The property is used for taxable activities (e.g., rental with VAT, commercial use)
- The company submits input VAT claims through periodic VAT returns
This is common for:
- Commercial buildings
- Offices
- Warehouses
- Short‑term rental units (Airbnb‑type operations with VAT registration)
5.3 VAT Refund for Renovations (Primary Residence)
Homeowners may receive a VAT refund on renovation works for their primary residence:
- Refund applies to labour costs
- Refund rate: Up to 5%
- Applies only to registered contractors
5.4 VAT Refund for Energy‑Saving Upgrades
Cyprus offers VAT refunds or subsidies for:
- Solar panels
- Insulation
- Energy‑efficient windows
- Heat pumps
These are part of national energy‑efficiency schemes.
6. VAT on Rental Properties
Long‑Term Residential Rentals
- Exempt from VAT
- No VAT refund available
Short‑Term Rentals (Airbnb, holiday lets)
- Subject to VAT
- Owners may register for VAT and claim input VAT refunds on:
- Furniture
- Renovations
- Appliances
- Property purchase (if structured correctly)
7. VAT vs Transfer Fees
A key rule:
- If VAT is paid on the property, no transfer fees apply.
- If VAT is not paid (resale property), transfer fees apply at 50% of the standard rate.
This often influences buyer decisions.
8. Summary Table
| Scenario | VAT Rate | Refund Possible? | Notes |
|---|---|---|---|
| New property, primary residence | 5% | No | Must live in the home for 10 years |
| New property, investment | 19% | Possible (if VAT‑registered business) | No transfer fees |
| Resale property | 0% | No | Transfer fees apply |
| Commercial property | 19% | Yes | VAT‑registered companies can reclaim |
| Renovations (primary residence) | 19% | Yes (labour only) | Refund up to 5% |
| Energy upgrades | 19% | Yes | Government schemes |