How will changes in property tax affect the real estate market in Cyprus?

Overview of Value Added Tax (VAT) in Cyprus

A review of history shows that when purchasing real estate in various countries, taxation is an important factor, particularly the presence of value-added tax (VAT). In the Republic of Cyprus, this tax is quite high and amounts to a whole19%However, not long ago, buyers had the opportunity to significantly reduce this rate to5%only once when purchasing a single real estate property.

Conditions for receiving the benefit

It should be emphasized that in order to receive this benefit, the purchased property had to be used as the primary residence, which excluded the possibility of renting it out. This decision was made to support low-income citizens in Cyprus, providing them with the opportunity to save on one of the most important purchases in life.

Application of the discount

Nevertheless, as Anastasia Yanni, managing partner of Cyprus Sotheby’s International Realty, points out, despite the fact that the mentioned discount was originally intended to help low-income families, it has also been actively used by more affluent citizens, including foreign investors.

After the scandal related to the "golden passport" program, which allowed individuals to obtain citizenship by making investments starting from€2 millionor more, attention to this issue has increased. The difference in14%The impact of such large transactions was significant on the overall value.

Restrictions on benefits

However, it is important to note that until recently, this tax benefit applied only to the first200 square meters, while exceeding this area obligated buyers to pay the full tax rate in19%Even with such limitationsEuropean UnionHe expressed dissatisfaction, noting that Cyprus does not comply with the proper EU rules regarding tax benefits related to social security.

Checks and changes

As a result, in the autumn months2022The government authorities of Cyprus conducted an inspection of more than two thousand properties purchased at a discounted rate. The results of this inspection were disappointing:

• Only50%Such objects were indeed used as primary housing.
• About four hundred owners admitted that they do not live at the specified address.

In December2022European CommissionThey issued an ultimatum to Cyprus, threatening legal action and fines if changes are not made to the tax legislation.

New rules for reducing VAT

So, uh,June 8, 2023The Parliament of the Republic of Cyprus voted to amend the rules for calculating the reduced VAT rate on the purchase of new properties. The basic rate remains unchanged —19%...but the possibility of its reduction, provided that this is the buyer's first and only home, has been maintained at the level...5%However, there are strict restrictions in place regarding both the area and the cost of the properties to qualify for the benefit.

Restrictions for new housing projects

Currently, the reduced VAT rate can only be applied to housing with an area of less than190 square metersand only on the first ones130 square metersFor example, if you have decided to purchase an apartment with an area of150 square meters, then5%VAT will apply to the first130 square metersand for the remaining ones20 squaresthe standard rate will apply in19%These changes were a response to criticism and aimed at ensuring that benefits reach those who truly need them.

Changes in tax legislation

In the near future, the purchase of properties with zero VAT will only be possible for transactions where the price of the real estate does not exceed €475,000. Thus, the tax benefit will apply exclusively to the amount of €350,000. At the same time, lawmakers have supported the introduction of a transitional period.

This means that existing properties on the market, as well as those for which a building permit will be obtained within four months after the new regulation comes into effect, will be able to be sold under the old tax rules, which take into account the area eligible for benefits — up to 200 square meters.

Impact on the real estate market

It is important to note that rapid changes in legislation will not have a significant impact on the real estate market, where traditional projects will continue to prevail. However, over time, the number of properties falling under the new conditions will increase, making it more difficult to save on the purchase of residential real estate.

Benefits for elite properties

The key point is that the reduced VAT rate will not apply to luxury real estate, which could definitely affect interest in such offerings. As Anastasia Yanni claims, in the future, we can also expect a decrease in interest in new projects, as the VAT will not apply to secondary market housing.

In practice, this means that a large portion of Cyprus' citizens, accounting for about two-thirds of all real estate transactions, may prefer the secondary market.

Foreign buyers

At the same time, a certain category of foreign buyers, including Belarusians, Russians, and Ukrainians, is interested in purchasing real estate with the aim of obtaining permanent residency. To do this, it is necessary to acquire a new building worth at least €300,000.

Thus, only those buyers who invest in a very narrow and currently the most attractive segment of the market will be able to take advantage of the reduced VAT rate.

Offers in the Cyprus market

For example, in Cyprus, there are many listings with prices exceeding €300,000. One such property is a magnificent villa in Paphos priced at €3,400,000, with an area of 495 m² and five bedrooms. This unique architectural masterpiece offers the enjoyment of stunning design and the tranquility of the Mediterranean coast.

• Spacious rooms
• Cozy living areas
• The perfect place for comfortable living

Other interesting projects

It is also worth noting another interesting project — a villa in Paphos for €495,000, with an area of 166 m² and four bedrooms. This new two-story villa is located in a picturesque natural setting, right in the heart of the growing Peyia area.

The project was implemented with a focus on maximizing the use of the land, ensuring that each house has a beautiful view while still providing comfortable and spacious living areas.

Conclusion

It should be emphasized that the real estate market in Cyprus continues to attract the attention of buyers, despite the recent changes in tax regulations, making the process of acquiring property increasingly interesting and diverse.

Luxury villa in Paphos

In Cyprus, in the picturesque city of Paphos, an exceptional opportunity arises to purchase a luxurious villa for €585,000. This residence boasts an impressive area of 177 square meters and includes three comfortable bedrooms, as well as three bathrooms, making it perfect for family living or hosting guests.

The villa is conveniently located close to the sea, just a few minutes away from a famous five-star hotel and numerous spectacular attractions, making it an excellent choice for active leisure enthusiasts. The area features popular tourist spots, a British school, a popular promenade, and the Kings Avenue Mall shopping center.

The interiors of this home radiate light and coziness, while the inviting outdoor spaces are designed for maximum relaxation.

Modern apartment in the center

A stylish apartment is also for sale for €475,000, located in the heart of Paphos with a total area of 150 m². This modern project is situated in one of the most prestigious areas of the city, just a few minutes away from the picturesque beach and the harbor area.

All the necessary amenities for comfortable living are located in close proximity, including:

• stores
• schools
• kindergartens

This is the perfect choice for those who value access to all the benefits of city life without the need to use a car.

Villa at a golf resort

Another magnificent offer is a villa priced at €905,000, occupying an impressive 320 square meters, and located in the Venus Rock golf resort area. Its convenient location just 15 minutes from the center of Paphos and a few minutes from the sea makes this offer particularly enticing.

The villa is surrounded by beautifully landscaped greenery and includes:

• private pool
• four bedrooms
• four bathrooms

These features provide complete comfort and privacy for their residents.

Affordable apartment at an attractive price

If you are looking for more affordable housing, it is worth considering an apartment for €355,000. This cozy apartment has an area of 100 m² and includes three bedrooms and two bathrooms.

When you make a purchase, you will also have the option to arrange.residence permitAdditionally, you can carry out the transaction remotely with payment in rubles or cryptocurrency. A residence permit in Cyprus opens up new horizons for you and provides a status that ensures visa-free entry and residence in the country.

Unique villa with a designer project

For those looking to acquire something truly unique and unusual, we can offer a villa with an area of 179 m², priced at €777,950. This project features an extraordinary design and high-quality architecture.

The complex includes:

• 35 different villas
• several blocks of luxury apartments

Nestled in a picturesque setting, this villa offers high-quality finishes, creating the perfect conditions for comfortable living.

New apartment in Paphos

And finally, for €330,000 you can purchase an apartment in Paphos with a total area of 98 m². The construction of a new multi-story residential complex nearby is expected to be completed in the coming months, which is located near:

• Venus Beach
• Aspire British School
• archaeological park "Tombs of the Kings"

This project will be an excellent choice for those who value a convenient location, modern amenities, and comfort.

Don't miss the chance to become a property owner on this magnificent island!

Modern apartments in Paphos

In this picturesque area of Paphos, you can find 14 modern apartments featuring numerous amenities, such as a communal pool, a children's playground, and designated parking spaces, making it an ideal place for comfortable living.

Villa Foutina: Attractive Offers

Among the interesting real estate properties, we can mention the Foutina villa, which is priced at750,000 €with a total area192 m²in which are placed4 bedrooms,3 bathroomsand3 toiletsThe building is located on a picturesque hill in the city of Chloraka and is part of a larger project that includes23 modern villasEach of which offers unique living conditions and meets the highest standards of comfort and quality.

Real estate for €430,000

Another villa, Foutina, is something to be proud of, with a price of430,000 €with a total area180 m²This property also includes4 bedrooms,3 bathroomsand3 toiletsAn important feature of this villa is the possibility of obtainingresidence permit (RP)when purchasing, as well as the option for online viewing and remote transaction processing.

• Payment can be made in rubles.
• Citizens of non-EU countries can obtain permanent residency in just two months.

New ready villa

Among the listings, there is also a new ready villa with an area of200 square meters, the cost of which is777,380 €This villa contains3 bedroomsand3 bathroomsIts distinguishing feature is a high-quality interior and modern amenities.

• The total area with covered spaces is195 sq.m.
• The total area of the plot is454.2 sq.m.
• The deal can be completed in just3 monthsafter signing the contract.
• The cost is350,000 €plus VAT.

The specified price also includes furniture and appliances, which brings the total amount to380,000 €plus5% VAT.

Another attractive villa

Equally attractive is the villa, which is priced at777,435 €and offers similar sizes and amenities. There is also the option to arrangeResidence permitWhen purchasing, the transaction can be completed online with payment in rubles.

• You can obtain permanent resident status in justtwo months.
• Terms of the installment plan for a period ofa year and a halfwithout additional fees.
• Availability of a ready title for the land.

New residential complex in Peyia

Finally, it is worth mentioning the new residential complex, which includes28 villasandtownhousesand which is located in the center of Peyia — a popular resort area of Paphos.

Real estate in Cyprus: the perfect investment

Cyprus, specifically its wonderful city of Paphos, is a great place to invest in residential real estate. For example, for just 777,650,000 euros, you can own a magnificent villa with an area of 140 square meters, featuring four bedrooms and three bathrooms. By purchasing such a property, you gain the opportunity to arrange...residence permitThanks to modern technology, transactions can be conducted remotely, and virtual presentations of properties are also available. Payments can be made in both rubles and cryptocurrency.

Quick acquisition of permanent residency

One of the most appealing aspects of purchasing real estate is the quick process of obtaining permanent residency within two months, which makes the relocation process significantly easier. We will also assist you in opening a euro bank account at one of the local banks.

The prestigious St. George area

In the prestigious St. George area of Paphos, only new villas are being built, which are already ready for occupancy and located just 100 meters from the beach of a five-star hotel. This area has all the necessary amenities within walking distance, making life here very comfortable and convenient.

Additional real estate proposals

• Villa in ChlorakaFor 777,435,000 euros, you can become the owner of a villa with an area of 155 square meters, featuring four bedrooms and three bathrooms.
• Panoramic viewsEach villa offers a panoramic view of the sea and includes a rooftop terrace.
• Installment planAn installment plan for 18 months is available, making the offer more accessible.
• Accelerated procedure for obtaining permanent residencythe possibility of obtaining permanent residency in three months.

Alternatives for investors

In addition to everything, there is an opportunity to purchase an apartment for 777,300,000 euros. The total area of this apartment is 100 square meters, and it includes one bedroom, one bathroom, and a kitchen. When buying this property, it is also possible to arrange...residence permitCyprus offers simplified conditions for obtaining permanent residency to citizens from Russia, which is significant for many investors. We provide assistance in opening bank accounts and organizing money transfers to Cyprus, making the process as convenient as possible for you.

Citizenship through investment

The program for obtaining permanent residency in Cyprus also opens the door to acquiring citizenship in European Union countries after five years, which can be a decisive factor for many investors. The last available apartment with a stunning sea view is located in a new prestigious complex near the King Avenue shopping center in Paphos.

Other real estate options

• Villa with spacious roomsAnother villa for sale for 777,300,000 euros has an area of 160 square meters and includes four bedrooms, three comfortable bathrooms, and a spacious kitchen.
• Remote purchaseYou can place an order online, and payment is accepted in rubles or cryptocurrency.
• LendingThe mortgage interest rate is only 5-6%.
• Accelerated processing of permanent residencythe opportunity to quickly obtain permanent residency in two months and open a bank account in euros.

Prospects for buyers

We organize possible trips to Cyprus for potential buyers to view properties, which will allow you to get to know the offerings better on-site.

Spacious residential property options

If you are interested in a more spacious villa, for 777,420,000 euros you can purchase a property with an area of 210 square meters, featuring four bedrooms and three bathrooms. This luxurious villa is located in Chloraka, just 700 meters from the sea. Nearby, you will find St. George beach and the international private school Aspire British School. There are also installment options available from the developer. The new house is already ready for occupancy, and there are new developments for sale with various villa options to choose from. Buyers can choose between 3 or 4 bedrooms, and we are fully prepared to assist in organizing the transaction with maximum convenience for you.

Conclusion

In conclusion, the changes in Cyprus's tax legislation regarding VAT on property purchases represent an important step that is likely to alter the market dynamics. It is worth noting that although this benefit was initially intended to assist low-income families, over time it has attracted the attention of more affluent buyers, including foreigners, which ultimately led to a negative reaction from the European Commission.

New restrictions on the application of the preferential rate for real estate may have a significant impact on demand, especially in the residential property segment.

Impact on the market

Cypriots, who make up the majority of buyers, may turn their attention to the secondary market, which will also lead to changes in the price structure. For foreigners seeking permanent residency, the situation becomes more complicated, and they will have to rely on a narrow range of new properties that qualify for favorable taxation.

Market prospects

Nevertheless, looking back at these changes, it is important to understand that the consequences of this reform will not be felt immediately, but gradually, depending on how the market adapts to the new conditions.

As I see it, the real estate market in Cyprus will face interesting challenges and opportunities in the coming years.

• Interest from foreigners:Stable interest from foreigners may lead to an increase in prices for limited resources.
• Limited primary objects:The number of primary objects that comply with the new rules will be limited.
• Analysis of opportunities:For buyers, it is important to carefully analyze their options and the future of the market.

Final thoughts

The coming months will be crucial in determining how the real estate market in Cyprus will respond to these changes. I sincerely wish all potential buyers good luck on this challenging yet exciting journey through the world of real estate in Cyprus.