They say that man’s home is his castle, and within it, he wants to shelter his dreams. However, before you proceed with this significant step, it is important to be aware of the changes regarding VAT for the purchase of a primary residence.
Last June, the House of Representatives passed the amending bill for the application of the reduced VAT rate of 5% on primary residence, which will be applicable both for houses and apartments. According to the new provisions of the VAT Law, the reduced rate will be applied to the first 130 sq.m. of a buildable residential area up to a property value of €350,000, provided the total transaction does not exceed €475,000 and/or the total buildable area is no more than 190 sq.m.
For instance, if the buildable area of your first residence is 190 sq.m. and/or the total property value is €475,000, then, for the first 130 sq.m., you will benefit from the reduced VAT rate of 5%. The VAT from 130 sq.m. to 190 sq.m. will be at 19%. If now the buildable area of the first residence is up to 130 sq.m. and the value is up to €350,000, then you will fully benefit from the reduced VAT rate of 5%. If the buildable area exceeds 190 sq.m. or the total value of the residence exceeds €475,000, then the reduced VAT rate of 5% does not apply at all, and the rate of 19% is applied from the first square meter.
Moreover other significant modifications have emerged, concerning individuals with disabilities. According to the amendment, If the buyer is a person with a disability, then they can apply for the reduced rate of VAT of 5% for the first 190 square meters (instead of the first 130 sq.m.) of buildable residential area, regardless of the total buildable area of the residence.
It is worth noting that a transitional period is provided. That means that the new proposed amendments to the VAT Law will not apply in cases where urban planning permission has been obtained or an application for such permission has been submitted before 31st of October 2023. In this case, the previous provision of the VAT Law will be applicable, i.e. 5% VAT to the first 200 sq.m. irrespective of the total buildable area of the property or the total value of the transaction.
Taking into consideration these changes and the new framework, Kimonas Group encourages individuals aiming to acquire their own residence to act promptly. It is important to mention that Kimonas Group has submitted all applications for building permits before 31/10/23 and, therefore, has secured a reduced VAT rate of 5% for all its projects.