EU pushing Cyprus on home VAT bill
Cyprus is currently facing a serious issue with its 5% value-added tax rate for first-time homeowners, as the European Commission has issued a final warning to Nicosia to pass a bill that regulates the issue, which has been ongoing since 2020.
New Finance Minister Makis Keravnos confirmed that Cyprus has exceeded the period given by the European Commission to settle the issue and is at risk of sanctions if it is not resolved. The last warning was issued in December, and the minister has instructed that the bill be given priority for approval.
Until now, there was no limit on the area built by citizens, and the reduced VAT rate of 5% applied to the first 200 square meters. However, with the new bill, the Commission wants the low VAT rate of 5% to be applied to homes up to 220 sq.m., so that 5% applied to the first 170 sq.m., but for the remaining area up to 220 sq.m., VAT of 19% will apply.
Additionally, for a citizen to benefit from the measure, their home should not exceed the estimated value of 350,000 euros. If their main residence exceeds either €350,000 or 220 sq.m., the consumer will not be entitled to benefit from the measure.
