There seems to be some confusion regarding paying VAT on the purchase of property after Cyprus takes on the Euro beginning in 2008. Many people believe that starting in 2008 all property purchases will have Value Added Tax added to it, which is not the case. Any purchase of property that received its’ planning permit prior to May 1, 2004 will not have VAT apply and every property that has applied for building permit after May 1, 2004 will have VAT added regardless of when the agreement is signed between developer and buyer. VAT currently does not apply to the purchase of vacant land but as of January 6, 2008 all purchases will have V.A.T. added.
In regard to V.A.T. rates on other goods and services the standard 15% is charged on almost all goods and services. There are some exceptions and for these exceptions there are four VAT rates depending on the good or service: 15%, 8%, 5% and 0%. Restaurants, except for alcoholic beverages, hotel accommodation, as well as transport of passengers by taxi and buses are taxable at the rate at 8%.
The 5% rate applies on services to writers, artist, undertakers, farm products (fertilizers, live animals, food for the animals, seeds.) non bottled water, books, newspapers, transportation, coffins, newspapers, books, periodicals, certain products for persons with special need, ice cream and the letting of camping sites and caravan parks.
Medicines and airfares, bank services, medical and dental services are taxable at the zero rate or exempted from any VAT charge. Also leasing or letting of immovable property, the supply of immovable property with the exception of buildings or parts of buildings and the land on which they stand if the application for a building permit was submitted after the 1st May, 2004, financial services, lotteries, social welfare, education, sports, cultural services, insurance transactions area all at the zero rate.
There is also a special exemption for foreigners visiting Cyprus so that they can get tax free shopping. According to the V.A.T. legislation, visitors to Cyprus from countries outside the EU can -claim back the V.A.T. on goods exported to a country other than in the EU in their hand luggage.
Temporary visitors do not have to pay any duties and VAT on arrival in Cyprus for the goods they bring with them for personal use.