VAT on Land in Cyprus - Updated: January 2008
January 1st 2008 was a landmark date for Aphrodite’s Isle in many ways. Not only did it see the adoption of the Euro as the Republic’s currency, but also the introduction of VAT on land in Cyprus.
VAT on Land in Cyprus - What are the implications on property prices?
In a nutshell, VAT on land purchases has created slight overnight price rises, as all new properties bought since the January 1st deadline are subject to VAT, whereas all properties bought before this time are not.
Therefore, a property for sale without VAT on December 31st 2007, is sold with an additional 15% added to the land's (not the building's) original price from January 1st 2008.
For the purposes of an explanation, let's for a moment assume that a villa's price in December 2007 was C£150,000 and that the building plot accounts for 25% of the property's total price. |
Search our portfolio and find bargains and prime investment homes
|
Since VAT on land in Cyprus became a factor on January 1st, an additional 15% has become payable on the cost of the land, so the property’s price now breaks down as follows:
Total Purchase Price (Pre-VAT):
Cost of Building
Cost of Land
VAT on Cost of Land @15%
Total Purchase Price (Post-VAT): |
C£150,000
C£112,500
C£37,500
C£5,625
C£155,625 |
So, without any further ado, the villa’s price has increased by around 3% literally overnight.
Remember that this is of course in addition to the average property price increases, which range between 10% and 20% annually, depending on location and property type.
It is also interesting to note that the Republic of Cyprus has not experienced an annual growth in property values of less that 8% since 1974, a fact which has greatly added to its overall investment appeal through the years.
Furthermore, the long-term effects of VAT on land in Cyprus are cumulative. If the price of land rises by 20%, the amount of VAT payable on it will of course rise proportionally, thus providing extra gains for buyers who managed to beat the deadline.
But it's not all bad news... far from it
Whilst property prices may have taken a slight rise overnight, the introduction of the Euro as the official currency of Cyprus has also caused interest rates to be brought into line with the rest of the Euro-Zone, thus making borrowing substantially cheaper than prior to January 1st.
Additionally, 2008 is widely predicted to be a bumper year for the Cypriot property market, as many investors who have been waiting for the Euro's adoption will commit themselves during the course of this year, and so fuel steady property price rises throughout the year.
So, although the introduction of VAT on land in Cyprus may, at least on the face of it, have pushed up local property prices by a not insubstantial amount, this fact is more than compensated for by a number of factors associated with the Republic's adoption of the Euro as its currency.
If you would like further information about Vat on land in the Republic, or any other aspect of the local real estate market, please feel free to contact us for a friendly, no-obligation consultation.
Click here to return to our main Tax Information Page
Click here to return to the main Information
about Cyprus page
|
Search
for Properties 
