If you are thinking about buying a newly constructed home, there is a high demand in Paphos currently and as a result most available options are off plan. A benefit of this is that you can choose the fittings and finishes suited to your taste. Before you get to that point however, some important information regarding taxes should be noted.
Cyprus VAT tax laws provides for the imposition of 19% VAT co-efficient on the purchase of newly built real estate, but an exception to this rule is a reduced rate of 5% VAT which is applied on the construction or purchase of houses/apartments for first-time home buyers who intend to use it as their main and permanent residence.
In its current form the scheme applies to the purchase of any residential property, irrespective of the total area or value, with the reduced 5% VAT coefficient applying to the first 200 sqm of the property. Any area above this is taxed at the normal VAT rate of 19%.
The scheme imposes an obligation for a purchaser to maintain ownership and residency in the property for a minimum period of 10 years. If the purchaser intends to sell or rent out the property before the 10 year period elapses, a payment is required to the Tax Department for the VAT difference, in proportion to the remainder of the 10 year period.
Under the new rules, the reduced 5% VAT rate applies to the first 130 sqm of a primary residence provided the
Paphos New Construction Homes
below conditions are met. Individuals with disabilities are entitled to a reduced rate of 5% on the first 190 sqm of their primary residence.
a) The primary residence has a value of up to 350,000 euros.
b) The total transaction value does not exceed 475,000 euros.
c) The total constructed internal areas do not exceed 190 sqm.
The new criteria will not apply if planning permission has already been issued or if an application for planning permission is filed before 31st October 2023.
The prices of the new build properties have increased, along with construction costs and the majority of smaller 3 bedroom villas now on the market in the Paphos area are from 450,000 euros upwards. Your associated costs to purchase off plan will be the VAT (if you own a property, you will need to sell it first if you want to apply for the 5% VAT rate) and lawyers fees which are generally 1% plus VAT. Additonally, the majority of developers have some negotiation room, but we don’t see large reductions being offered due to the buoyant market.
As noted, real estate prices as well as other living expenses have risen around the world, not just in Paphos, but with the assistance of a licensed estate agent, we can help make your dream of home ownershp come true! Please feel free to call or email us anytime, and we would be happy to answer any questions.
by Cleo Shahateet
