Recently the Cyprus Council of Ministers has come to a decision to provide a VAT refund to individuals who bought land for the construction of their primary residence in Cyprus.
The purpose of this VAT refund is to reduce the VAT rate on the acquisition of land from 19% to 5%, making it in this way the same VAT rate applicable for the construction of the primary residence.
Eligible individuals will be entitled to a refund paid on the acquisition of the land, at the rate of 14% on the value of the land, leading to a rate of 5% (19%-14%) applied on the purchase of the land.
In an announcement on the 25th of September 2019, the Cyprus Tax Department stated that any individual who wishes to apply for the VAT refund, should submit the relevant Application named “Application for refund of VAT imposed on the acquisition of land for the construction of residence under the reduced VAT rate” to the district Tax Office.
The refund is applicable on the acquisitions of land purchased after January the 2nd 2018.
The VAT refund will be provided to the eligible applicant, only after his actual relocation to the residence and the applicant will also need to submit further documentation such as a copy of a water or electricity bill, in order to prove that the building is indeed used as his main and permanent residence.
The Cyprus Tax Department is expected to provide more guidance and clarifications, addressing inquiries about the above matter.