Cyprus Property News for home buyers & real estate investors in Cyprus

4th December 2021
Cyprus Property News logo
HomeLegal MattersCyprus failing to comply with EU VAT rules for dwellings

Cyprus failing to comply with EU VAT rules for dwellings

The European Commission has decided to send a letter of formal notice to Cyprus for its failure to properly apply EU VAT rules for dwellings purchased or constructed in Cyprus.

Cyprus allows a reduced rate of VAT of 5% on the first 200m2 of dwellings used as the principal and permanent residence by the beneficiary, without any other limitations. In particular, the reduced rate is applied regardless of the income, assets and economic situation of the beneficiary, the members of the family that will reside in the dwellings, and the maximum total area of the dwellings concerned.

The VAT Directive does allow Member States to apply a reduced rate of VAT on housing as part of a social policy. However, the wide scope of the Cypriot legislation and the lack of limitations therein indicate that the measure goes beyond the objective of a social policy.

Consequently, the Commission considers Cyprus has failed to fulfil its obligations under the VAT Directive. Cyprus now has two months to address the shortcomings identified in this letter of formal notice.

If Cyprus does not take appropriate steps within the next two months, the Commission may decide to send a reasoned opinion.

(In its regular package of infringement decisions, the European Commission pursues legal action against Member States for failing to comply with their obligations under EU law. These decisions, covering various sectors and EU policy areas, aim to ensure the proper application of EU law for the benefit of citizens and businesses.

For more information on the EU infringement procedure, see the full Q&A. For more detail on all decisions taken, consult the infringement decisions’ register.)

Further reading

European Commission infringement decisions 15 July 2021

1 COMMENT

  1. What has happened to housing in Limassol. Looking from the coast north I see a shambles. Dwellings packed together haphazardly looking like an unsightly rubbish tip from a distance. These are not for the working, management or junior executives. Glass, stainless steel and ugly flat roofs. No planned build theme, just lets add another unit here or there. Doesn’t matter if it matches with anything but looks expensive. Some requiring refurbishment even before sold and most unoccupied.

    Can you guess the area described? Can this go on?

Comments are closed.

Sign up to receive our free Cyprus property newsletter

We guarantee that we do not spam and will not divulge your email address to any third party.

Read our privacy policy for more information.

Cyprus property transfer fees

Property capital gains tax (CGT) calculator

EUR - Euro Member Countries
GBP
1.1696
RUB
0.0119
CNY
0.1386
CHF
0.9633

Top Stories