The Department of Taxation informs that compliance checks, regarding the correctness of imposing a 5% Reduced Value Added Tax (VAT) Rate on the purchase/construction of a main and permanent residence, continue, and in this context calls for voluntary compliance those who have been approved for a reduced rate, without having this right, either from the outset or before the expiry of ten years.
According to the Value Added Tax Legislation, citizens of the Republic of Cyprus or another state (over 18 years of age) who acquire a residence for use as their main and permanent place of residence in the Republic have the right to apply a Reduced VAT Rate of 5% for the acquisition of a residence.
In the event that the residence, for which approval has been given for the imposition of a Reduced VAT Rate of 5%, has not been used or has ceased to be used as the main and permanent place of residence for a period of less than ten years, then a claim is created on the part of the Tax Department for the recovery of that amount of VAT that the owner benefited without having this right.
On the basis of the above, the Tax Department urges those who fall into the above cases to contact the District Offices of the Tax Department immediately for a refund of the VAT they wrongly benefited from. Where and where there is financial difficulty for a one-off payment of the debt, the possibility of gradual repayment of up to 12 installments will be given, while in exceptional cases the Tax Commissioner may approve an extension of the payment plan.
