On the 26 August 2011 the House of Representatives approved legislation aimed at stimulating the local property market.

The legislation passed provides that eligible persons will be subject to a lower VAT rate of 5% on the purchase or construction of a first residence. The rate will apply for the first 200 square meters of residences of total covered area of up to 300 square meters and takes force as of 1 November 2011.

Under the legislation an “eligible person” is defined as any individual who fulfills the following conditions:

(i) has completed 18 years of age at the time of submission of his application,

(ii) is a citizen of the Republic of Cyprus or any other Member State of the EU, and

(iii) does not own any other place of residence in Cyprus.

It should be noted that the reduced rate applies only for properties which are used as the primary and permanent place of residence.

The current VAT refund scheme will cease to apply once all pending applications are examined. Applications for VAT refund can be submitted up until the 1 November 2011.

Pekris & Theodorou LLC is a Cyprus law firm with Cyprus lawyers and other legal experts on legal matters involving Cyprus law, EU law and international law. The above should be used as a source of general information only. It is not intended to give a definitive statement of the law and is subject to the disclaimer.

Further Property Law related information is available here.

Update: Legislation rejected by President and not enacted. Amending Law 129(I)/2011 enacted, which can be can be viewed (Greek language) here.