The AKEL party has proposed a bill that would abolish the preferential VAT rate of 5% for foreign nationals who purchase or build residential property in Cyprus. The bill was initiated by MP Giorgos Loucaides, who proposes to amend the Value Added Tax Law so that third-country nationals can no longer benefit from this benefit.
Reasons for changes
The preferential VAT rate was originally intended to support low- and middle-income families. However, as AKEL representatives point out, this tax benefit has been misused, creating unfair advantages for foreign buyers. As a result, large-scale property purchases by foreigners have contributed to rising residential property prices, making them less affordable for locals.
The bill stipulates that the abolition of the tax benefit will help control prices for residential real estate and prevent a further shortage of residential properties. In addition, it will help reduce the state’s financial losses and ensure more efficient use of budget funds.
Impact on the real estate market
MP Giorgos Loukaides stressed that in recent years there has been a sharp increase in the number of foreign buyers, mainly wealthy investors and highly paid professionals. This trend is exacerbating the crisis in the real estate market, increasing demand and prices. AKEL has already raised this issue at meetings of the parliamentary committee on internal affairs, and now the party has officially submitted a proposal to abolish the reduced VAT rate for foreigners.
The aim of the bill is to direct state support to those who really need it. VAT exemptions should be part of social policy supporting low- and middle-income families, not a tool to attract foreign investment. Loucaides criticized the policies of current and previous governments, which, he said, had used tax exemptions too broadly, allowing them to be used to the detriment of local consumers.
The MP noted that for a long time the government had put the interests of wealthy investors above the needs of ordinary citizens who were having difficulty acquiring residential property. The bill is intended to correct this injustice and restore balance to the real estate market.
