Cyprus has received the green light from the European Commission to implement changes to the Law on charging a preferential VAT rate on new real estate.
This was announced by Finance Minister Makis Keravnos on Monday, January 22.
The new rules were approved by the Parliament of the island state back in June 2023. The innovations came into force on November 1, 2023.
At the same time, they were approved only in Cyprus. The EU did not approve the new rules. The fact is that initially, the European Commission supported the option, in which the reduced VAT rate of 5% applied to new houses and apartments with an area of up to 110 m2. However the Parliament of Cyprus, in agreement with the executive branch, decided to increase this figure to 130 m2, which led to some debate. After long negotiations, the European Commission finally gave its approval.
I must say that tremendous efforts were made. Personally, there were many times I met with the Commissioner and the Director General of the relevant Directorate General, and after many explanations and arguments, I am happy to say that the reduced VAT rate for real estate has been approved by the European Commission," Keravnos said.
Under the new rules, the reduced VAT rate of 5% applies to new houses and apartments with an area of up to 130 m2 and a value of up to 350 thousand euros.
If the area of the new building is larger or it is more expensive, but up to 190 m2 and up to 475 thousand euros, the additional area or cost must pay the full 19% VAT. If the apartment or house is larger than 190 m2 or more expensive than 450 thousand euros, the preferential rate does not apply. To such real estate now applies the full 19% VAT.
An exception will be made for low-income citizens. In particular, for this category of citizens preferential VAT is charged on the first 190 m2 of housing.