Young couples buying land for their first home in Cyprus mayonly pay 5 per cent VAT on its purchase price rather than 19 per cent under adraft bill submitted to parliament by the government.
The Government has submitted a draft bill to parliamentindirectly exempting from payment of 19 per cent VAT young couples who buy landfor the purpose of building a primary residence.
The issue is related to the passage of a law last Novemberimposing 19 per cent VAT on building land. In its wake, persons buying afinished housing unit or apartment as their primary dwelling must pay 5 percent VAT, whereas purchasing a plot of land for owner-occupied housing incurs a19 per cent VAT charge.
Now, the new bill provides that, whereas newlyweds buyingland for owner-occupied housing will pay the full tax rate, 14 per cent of theVAT imposed on the value of the land would be returned to them in the form of agrant so that ultimately, they only pay 5 per cent VAT.
Lawmakers meanwhile have tabled a legislative proposalaiming to eliminate a distortion where certain buyers of real estate must payproperty transfer fees while others do not. The bill was tabled by Disy MPAverof Neophytou.
When a person buys a new property in Cyprus and pays VAT onit, he or she is not subject to transfer fees, whereas transfer fees do applywhen the transaction involves a land lease.
But not all MPs are on board with the proposal, which wasdiscussed during a closed-doors session of the House finance committee. Whereas the lease option might benefitentrepreneurship – by eliminating transfer fees – this should not be done atthe expense of state revenues, as some of them believe.
After the VAT on building land was passed late last year,parliament brought regulations specifying which type of development would besubject to the tax. Protected zones and farming land were exempted.