Following an extend negotiation period spanning over two years, the European Commission and the Republic of Cyprus reached an agreement paving the way of amendments to the VAT law. The Official Gazette of the Republic of Cyprus promptly published the amending law 42(I)/2023 (“Law 42(I)/2023) on June 16, 2023.
The focal point of these amendments revolves around the reduced VAT rate of 5% specifically
concerning the acquisition and construction of primary and permanent residences in Cyprus.
Previously, as of November 18, 2016, this reduced rate applied to the first 200square meters of a residence's buildable area without imposing size or cost limitations.
Under the prior law, an individual could reapply for the 5% VAT rate for a new residence within 10 years under specific conditions, including ceasing to use the initial residence as a primary and permanent residence, notifying the VAT department, and paying difference between the reduced and standard VAT rates.
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