Circular 11/2023 on the reduced VAT 5% on residence

Written by Demetris Nicolaides
30 November, 2023

The Tax Department has issued Circular 11/2023 on 28 November 2023, to provide additional clarifications to the amending law (Ν.42(I)/2023) which  introduced important changes on the application of the reduced Value Added tax (VAT) rate of 5% on the purchase or construction of primary and permanent residence in the Republic and which entered into force on 16 June 2023 (read our previous article here).

New Provisions

Further to the legislation introduced, a reduced 5% VAT shall apply on the first 130 square meters (m²) of a residence purchased or constructed of a total value up to €350,000, provided that the total value of the acquisition does not exceed €475,000, and its buildable residential area does not exceed 190m².

The Circular has provided some further clarifications on how these provisions would apply on each situation which we have summarised in our table below.

The Circular has also provided examples on how these calculations would work. We have recreated these examples in a simple and intuitive excel spreadsheet. Users can download the below workings and are able to change the numbers to see how this would work for their specific case (obvious disclaimers apply).

Transitional Provisions

The transitional provisions allowed the reduced VAT rate of 5% to be applied on the purchase or construction of a residence in the first two hundred (200) square meters of buildable area based on the planning permit issued until October 31, 2023 or based on the application for the issuance of a planning permit submitted until October 31, 2023.

The Circular clarifies that there is a three-year window from June 16, 2023 for the submission of a fully completed Responsible Declaration to the Department of Town Planning and Housing

The application process is clarified:

  • Applications submitted until October 31, 2023, to obtain a five-digit identification number from the IPPODAMOS system are considered submitted for VAT purposes.
  • In cases of document deficiencies, a refusal of receipt is issued, necessitating a reapplication with a new five-digit number.
  • Upon completion of a thorough check and compliance verification, a Notice of Receipt is issued.

Moreover, if the Notice of Receipt aligns with the Development Plan and Regulations, subsequent purchasers of the same plot can utilize it for a reduced VAT rate declaration

Other

In the case of a person with a disability, the Amending Law allows a reduced VAT rate of 5% for the first 190 square meters of a residence, irrespective of the total buildable area. However, if the total transaction value exceeds €475,000, the standard VAT rate applies to the entire purchase or construction value.

Similarly, for large families (with at least four children), the residence’s total area is increased by 15 square meters per additional child beyond three, with the standard VAT rate applying to the entire transaction value if it exceeds €475,000.

We are available for any additional inquiries or clarifications you may require.

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