The Cyprus Government have recently announced exciting news for couples looking to buy their first property together. A draft bill has been submitted to parliament ultimately exempting the payment of 19% VAT for youths purchasing land for the purpose of building their first home or primary residence together in Cyprus.
The issue corresponds with legislation that was imposed late last year, levying a blanket 19% VAT on all Cyprus building land. In its wake, persons buying a finished housing unit or apartment as their primary dwelling must pay 5% VAT, whereas purchasing a plot of land for owner-occupied housing incurs a 19% VAT charge.
The new bill provides that recently married couples purchasing land for owner-occupied housing will pay the full rate of taxation, 14% of the VAT imposed on the value of the land would be returned to them in the form of a government funded grant so that ultimately, they only pay 5% VAT.
Officials and policymakers meanwhile have submitted a legislative proposal aiming to eliminate a distortion where certain buyers of real estate must pay property transfer fees while others do not. When an individual in Cyprus purchases land or a new property and pays VAT on it, they do not have pay to transfer fees, whereas when the transaction involves a land lease, transfer fees do apply.
To end current distortion in the Cyprus housing market, the proposal provides for the non-payment of transfer fees for rentals or leases of immovable property when the individuals involved already pay VAT on taxable business activity. But not all MPs are in agreement with the proposal, which was discussed during a closed session of the House finance committee.
After the VAT on building land was passed late last year, parliament brought regulations specifying which type of development would be subject to the tax.