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Claim back Cypriot VAT on property purchase

Under the Special Grant for Purchasing or Building a Residence, Law N.91(I)/2006 a special grant is available to qualifying individuals for a VAT grant from the government.

SEVERAL people have contacted me who have purchased property on the Island asking if they are eligible to apply for the special grant from the government.

Cyprus VAT grant scheme

In 2006, the Cypriot government enacted the Special Grant for Purchasing or Building a Residence, Law N.91(I)/2006 to help lower-income families afford a home in the face of ever-increasing house prices. The scheme enables first-time buyers who qualify under this scheme to a grant of two-thirds of the VAT they paid for their new home.

The scheme applies to EU citizens who are permanent residents of Cyprus. VAT grants are available under the following criteria:

  • The purchased property is the sole main residence of the applicant.
  • The applicant does not own any other property in Cyprus that is used as a main residence.
  • The applicant should be at least 18 years of age and must be an EU citizen.
  • The applicant must be permanently residing in Cyprus.

People may only claim the grant if they can prove that they are permanent residents and the authorities will check their usage of water and electricity, their source of income etc., to ensure that they are actually living on the Island permanently.

Limitations

  • On receipt of the grant, the beneficiary is required to use the property as their main and permanent residence for minimum period of ten years.
  • If the beneficiary ceases to use the residence as their main and permanent residence before the end of the ten-year period, they are required to inform the Ministry of Finance and return a proportion of the grant. (Note: This condition does not apply if the beneficiary transfers ownership of the property to their children or in the event of their death.)
  • If the beneficiary decides to buy or build a new residence before the expiry of the ten-year period they may apply again for the special grant. If approved, they will be able to set off with the amount of the grant eligible to receive for the new property.

For more information on the Cyprus VAT grant scheme for first time buyers, visit Cyprus Value Added Tax laws relating to property

Readers' comments

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  • @Bambouin – prior to Cyprus accession to the EU in 2004, if you bought a dwelling and land from a property developer, no VAT was payable. But this changed when Cyprus joined the EU.

    But it has always been the case that if you built yourself, VAT was payable.

  • Bambouin says:

    Nigel – thanks for the reply.

    I thought VAT payments on house construction were put in place in anticipation of EU entry. I know that people had to start paying the VAT before 1 May 2004, but I thought it was only for a year or two before actual EU entry when VAT became payable on construction. Perhaps I am mistaken.

  • @Bambouin – unfortunately, the VAT grant scheme is only available for those properties whose application for a building permit was submitted after 1st May 2004.

    Like the Cypriot couple you mention, I built a house on a plot of land and had to pay VAT on all the building costs. As my building permit application was submitted before 1st May 2004, I am not entitled to make a claim under the special grant scheme either.

    Incidentally, EU entry had nothing to do with paying VAT on construction costs for individual builds – this has always been the case. I built my house before Cyprus joined the EU and had to pay VAT.

  • Bambouin says:

    Hello,

    I have a relative who had a rather unfortunate experience with this law, and am just wondering if anyone has heard of similar cases, and if so, what one can do about it, if anything.

    The couple, both Cypriots and permanent residents, built a semi-detached house in 2004 on inherited land. Unfortunately, they submitted the application for building permission just prior to 1 May 2004, and started building in late 2004. They had to pay VAT on all building costs, but when this law was passed in 2006, it was done with this condition that it was only for property submitted after this date.

    I find this preposterous, as those who built after 1 May 2004, as they did had to pay VAT, but a few unfortunate people – not knowing what sort of law would be passed 2 years in the future – applied for permission before EU entry, but built after EU entry and had to pay the VAT.

    Anyone know of any similar cases and what – if anything – can be done about it ???

    Thanks

  • John says:

    I have come across a case where the developer informed the person who had bought a property from him that he (the developer) would help him (the purchaser) claim back the VAT. The developer said he would give the purchaser the €10,000 VAT. The purchaser said that’s OK I have already claimed back the €13,000 VAT. The developer said but I have not paid the VAT on the property yet and I paid most of my contractors and employees (from the north) in cash.

  • Alan Waring says:

    @Nigel. So that’s a minimum of 15 months (3 months plus 12 months) even with a fair wind behind you and not having any hindrances with your permanent residency application?

  • @Costas Apacket – I don’t believe that would be possible.

  • Costas Apacket says:

    Would it be possible for the ‘artful’ developers and their Lawyer buddies to have claimed back the VAT before they offer you the individual Title Deeds?

  • @Andrew – you can apply for a VAT grant even though you may not have the Title Deeds to the property. You can download a partly-translated application form from my website at http://www.cyprus-property-buyers.com/files/vat-refund-form.pdf

  • @Alan Waring – According to people living in the Eastern parts of Cyprus, it takes around 3 months to for the authorities to process a VAT grant application.

  • Andrew says:

    Under the second provision whereby an applicant should not own any other property in Cyprus. Does the prospective applicant “own” his first property in Cyprus, if he/she is awaiting transfer of Title Deeds?

  • Alan Waring says:

    I would imagine that by ‘permanent resident’ is meant someone in possession of an MEU3 Certificate of Permanent Residency, which requires a minimum of 5 years continuous residency in Cyprus as evidenced by local bank statements, utility bills, earnings, social insurance payments etc. Expect a successful application for an MEU3 to take about a year.

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