Value-added tax on Cypriot homes approved

The Cypriot parliament's plenary session on Thursday almost unanimously passed a law allowing a 5% reduction in the rate of value added tax on the first 130 square meters of basic housing, including houses and apartments. Forty-two MPs voted in favor of the measure, with one abstention.

The reduced VAT rate will apply to the first 130 square meters of main housing worth up to €350,000, provided that the total transaction value does not exceed €475,000 and the total built-up area does not exceed 190 square meters. The amendment "is in line with market data and satisfies to the greatest extent the requirements of the European directive, while remaining, in combination with the maximum transaction value, a socially targeted measure of secondary social'''protection'.

The draft law also includes a provision allowing the application of a reduced VAT rate on the first 190 square meters of built-up area for persons with disabilities.

During the long discussion in plenary, despite agreement on the adoption of the law, there was disagreement between the parties on the responsibility that led to the amendment of the legislation, which previously allowed a reduction in the VAT rate for the first 200 square meters of housing. The European Commission initiated''infringement proceedings against the Republic of Cyprus on the issue, saying that the specific measure was not implemented as a social policy.

Despite another proposal put forward by the Finance Ministry and endorsed by the Commission, Minister Makis Keravnos told parliament that he would respect the proposal to be voted on in parliament and would support it in the relevant EU bodies.

On Monday Keravnos warned that Nicosia risks being taken to the European Court of Justice and fined, and the EU could demand payment of all its own resources with overdue interest.