• Service: Tax, Global Indirect Tax
  • Type: Business and industry issue
  • Date: 8/1/2012

Changes and updates in Cyprus 

Changes and updates in Cyprus

New building disposals have been subject to the standard VAT rate since May 2004. However, in an attempt to boost local property sales, amendments to the VAT Act have been passed. The latest of these was introduced on 8 June 2012. Simultaneously, a measure concerning the import of various aircraft into the Republic of Cyprus was also introduced.

Land development sector

The above mentioned measures have evolved as follows:

  • 1 May 2004: a special state subsidy was granted to Cypriot and EU citizens for the purchase or the construction of new residential properties, which were subject to 15 percent VAT.
  • 1 October 2011: the special state subsidy was replaced by granting Cypriot and EU citizens a relief of 10 percent on the standard VAT rate. As such, they effectively had to pay the reduced VAT rate of 5 percent on the value of newly-constructed or sold residential properties.
  • 8 June 2012: The Cyprus House of Representatives voted in favor of extending the VAT relief to non-EU citizens purchasing or constructing residential properties in Cyprus.

This meant that non-EU citizens purchasing or constructing a residential property in Cyprus (with the intention of using it as their main and permanent residence while staying in Cyprus) are entitled to claim the VAT relief.

For someone to be entitled to the VAT relief, a number of conditions must be satisfied:

  • the applicant must be at least 18 years of age
  • the intended use of the property is that of a main and permanent residence while residing in the Republic
  • for a property to qualify for the relief, the total covered area should not exceed 275m2.

Deferred VAT on importing aircraft from outside the EU

A new amendment was passed by the Cyprus House of Representatives stating that, when a taxable person imports an aircraft to the Republic from outside the EU, import VAT is not payable at the time of the import. Instead, it is payable when the taxable person importing the aircraft submits their VAT return. The amendment covers aircrafts intended for business activities.

In practice, no VAT is actually payable, because when the output VAT is due (i.e. upon filing the VAT return) the taxable person may also claim the same amount as input VAT, thus ending up with no cash payment of import VAT.

Nevertheless, the VAT Commissioner reserves the right to request payment of a guarantee, of a value not exceeding the import VAT payable.


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