REALWorld Law


VAT on an acquisition

Is VAT payable on the purchase of real estate and if so, can it be recovered?



As a general rule, the transfer of real estate is exempt from VAT, unless the seller opts to charge VAT at the rate of 27%. The seller may choose to apply VAT to the sale of real property other than residential properties. If the transfer is subject to VAT, then the reverse charging mechanism applies and the buyer is liable for the VAT.

The transfer of new buildings and building plots is always subject to VAT, and the seller is liable for the VAT at the rate of 27% or 5% (ie no reverse charging applies). The lower rate (5%) applies to new residential buildings and apartments having a usable floor area not exceeding 300 sqm and 150 sqm, respectively or certain residential properties constructed within brownfield development projects implemented on  specifically designated areas. The VAT payable on the completion of a purchase of real estate may be reclaimed in accordance with the provisions of the VAT Act.