20.12.2023
Former EU states such as the UK have maintained a zero rate VAT policy on new residential properties. Meanwhile, current EU members such as Luxembourg have an ultra-reduced 3% VAT rate on the construction and renovation of new main residential buildings, capped at €50,000 VAT per home.
It is recommended to temporarily suspend the payment of VAT for at least 2-3 years for houses that are used as a main residence or, alternatively, or introduce an ultra-reduced VAT rate of 3%.
Regarding the proposed 3% rate, it is proposed that the policy be revised to include criteria for a “reasonable” (larger) home size and to take family size into account. Moreover, to eliminate regional differences in prices and simplify the process, it is recommended to completely eliminate property value as a criterion.
The definition of an average value property varies by region and type, making a single criterion impractical. Instead, it is proposed to introduce a VAT tax relief cap of €50,000. For residential real estate for rent, it is recommended either a temporary suspension of VAT payment or the introduction of a special (low) reduced VAT rate for 2-3 years.
This raises an interesting question: could Cyprus potentially benefit from an offer such as Greece, the UK or Luxembourg.
