FIRST HOME VAT RULES (5%) – TO BE OR NOT TO BE?
THE EUROPEAN COMMISSION BREATHING DOWN CYPRUS
Currently, by the law provided the low VAT rate of 5 per cent for the first 200 square metres of primary residence.This lower rate is applied irrespective of the total surface area of the home, income, property or economic conditions of the owners.
Brussels contends that Cyprus does not properly apply EU VAT rules for first homes purchased or built in Cyprus and the established rules in Cyprus exceeds the social policy stated in the VAT directive 2017/541.
At the beginning the government proposed the reduced VAT rate to the first 170 square metres of a home of a total surface area of 220 square metres and with a property value up to €350,000. For apartments, the low rate would apply to the first 90 square metres of a total surface area of 110 square metres and with a property value up to €200,000. The total surface area criterion would not apply to persons with a disability. However, the idea has met with resistance from several organisations – the Employers and Industrialists Federation, the Chamber of Commerce, the Cyprus Land & Property Owners Organisation and the Property Valuers Association.
The government then instead proposed to increase the value of real estate, both houses and apartments, to 500,000 euros, but this also met with many objections.
At the present stage the government is trying to renegotiate the issue with the European Commission and following the example of Greece, to get considerable leeway on this issue.