There are three rates for value added tax (VAT): the standard rate of 15 per cent, which was introduced on 1st January 2003; the reduced rate of 5 per cent, which came into force on 1st January 2000; and zero rating for certain goods and services.
Since 2002, VAT rating has changed on a number of goods, but below are the main items currently included in each category. VAT regulations have still not been finalised since the country’s EU accession, so always check the latest situation with your financial adviser or lawyer, especially when buying property.
Since 1st May 2004, when Cyprus joined the European Union, VAT has applied to all new properties, except those where the application for planning permission was submitted to the Planning Department before 1st May 2004. (Previously all immovable property had been exempt from VAT.) First-time buyers qualify for VAT at the reduced rate (5 per cent); all other buyers must pay VAT at the standard rate (15 per cent).
Certain goods and services are exempt from VAT, including rents, medical services and insurance and financial services. (The difference between exemption and zero rating is that businesses that supply only exempt products may not recover any VAT they’ve been charged.)
Zero-rated good and services include supplies of goods to other EU member states, exports, certain foods, medicines, children’s clothing, international air and sea transportation, and commissions received from abroad.
Reduced rate goods and services include new property (first-time buyers only), animal feed, accommodation in hotels and tourist establishments, refuse collection, and books, newspapers and magazines.
This is imposed on all goods and services, except those that are exempt or at the reduced rate, including new property (other than for first-time buyers).
This article is an extract from Buying a Home in Cyprus from Survival Books.