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VAT Frequently Asked Questions

VAT reduction application

VAT reduction application can be applied for by individuals (not for a company) to reduce the VAT rate from 19% to 5% but only for properties used as permanent homes (not to rent the property out). This “government grant” applies only for the primary 200square metres of their property, and if it is larger than 200square metres, 19% VAT will be paid for the remaining square meters. Nevertheless, the buyer who obtains a VAT reduction should maintain the property for a period of 10 years in order to keep the whole VAT discount. The property can still be sold before the end of the 10 year period, but an amount will need to be paid back to the VAT authority for the years which remained. 

Before you submit an application for VAT reduction, you need to make sure that:  

  1. you sign the contract for the acquisition of the property;
  2. the aforementioned contract is recorded at the Land Registry; 
  3. you do not connect the electricity on your name; you do not furnish the property; or stay in even for a single day.  

VAT rate payment before VAT reduction is approved:

Before the approval of VAT reduction, you will be required to pay 19% VAT to the seller of the property. As soon as your application is approved, you must provide the said approval to your developer who will pay you back 14% of your VAT payment. Any further payments to the developer, should have the lowest VAT rate of 5%.

Do married couples qualify for two VAT reductions if they purchase two separate new properties?  

You can claim back VAT, once, for buying a new property even when you are in a civil partnership. In other words, each married couple is only eligible for one VAT reduction application. Although you may purchase other new properties, you and your partner are legally entitled to share one VAT reduction.

Can I benefit from VAT reduction when I purchase a new property for investment?

You are not qualified for the VAT rebate whether you intend to rent the property out for a short or long period of time. Likewise, you are not eligible for the VAT reduction if you are purchasing a new property under your company’s name.

The VAT reduction is a “one off” payment, meaning that you are eligible to receive a reduced VAT rate only once if the above requirements are met. Nevertheless, you can reapply to get the reduction on a different property if you sell the one for which you received the VAT or if 10 years have passed since you obtained the rebate.

Is VAT applicable when you purchase Land?

Usually, you will be required to pay VAT, however there are exceptions in the Law where the sale of land is exempt from VAT. For further information regarding paying VAT for the purchase of land please contact our office as each case differs from one another. 

When do I have to pay transfer fees? 

You are not required to pay transfer fees if you purchased a new property, for which VAT was paid. However, this is not the case when purchasing a resale property (used) as you are required to pay transfer fees but not VAT. 

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