How to Pay VAT Correctly: 5% of the Actual Value of the Apartment or 5% of the Сadastral Value?

There is a big difference between the cadastral and actual values of an apartment. By law, you must pay VAT on the amount specified in the sales contract. But sometimes, it is not beneficial. If you purchase real estate for $100,000, you can pay 5% VAT on the actual price. However, if your deal is several million dollars - it will be unprofitable to pay 5% VAT on the actual value. But there is a way out. Your realtor must invite an appraiser who will set the cadastral value of the object. As you understand, it is much lower than the actual one, and then you can pay 5% VAT on the cadastral value of your property. There is one more tricky way: if the price of your apartment is not the lowest and you want to cut costs, then you can draw up a sales agreement for half of the property cost and make an addendum (appendix) to it, in which to write in the other half of the cost. In this case, you will pay 5% VAT on the amount in the main agreement.

But this scheme also has its pitfalls. For example, if you already have a registered sale and purchase agreement in the land registry, this option is not for you, as they will calculate the cost from the amount in the SPA.

And here is what our legal advisor recommends on the topic: "I advise you to register a sales agreement or else until the permit for the purchase is issued, the buyer has a risk. And if there are no separate certificates of ownership, one can not apply to The Council of Ministers without a registered contract.

With an additional agreement - yes, one can, but one should remember that during the trial, the court will only accept agreements with a stamp from the tax and payment of stamp duty. But if you signed the addendum a couple of years ago, you will have to pay also a fine.”

Engage only experienced realtors and lawyers in your sales transactions to help you avoid unnecessary expenses.