Cyprus is currently facing a serious issue with the 5% VAT rate for first-time homeowners. The European Commission has issued a final warning to pass a bill that regulates the issue that has been ongoing since 2020. Finance Minister Makis Kerynos 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 passage.
To give some background, until now, there was no limit on the square meters built by the consumer, and the reduced VAT rate of 5% applied to the first 200 sqm. However, with the new bill, the Commission wants the low VAT rate of 5% to be applied to houses up to 220 sq m, with 5% applied to the first 170 sq m. For the remaining sq m up to 220, VAT of 19% will be applied. Additionally, for a consumer to benefit from the measure, the house should not exceed 350 thousand euros. If the first house exceeds either 350 thousand euros or 220 square meters, the consumer will not be entitled to benefit from the measure.
Regarding apartments, a first-time homeowner will be entitled to a 5% VAT rate for apartments up to 110 sq m. The first 90 sq m will have a 5% rate, and the remaining will be 19%. Like the above rule for houses, there is a 200 thousand euro limit for value, and if it exceeds 110 sqm, it will not be eligible for the measure.
Cyprus has been given a final warning to pass the bill, and if not resolved, it will face sanctions. It is imperative that the government prioritizes passing the bill to prevent any further consequences.
[This article was translated from its Greek original]