Good news for young couples building their first home!
New government bill has been submitted to parliament, indirectly exempting young couples from paying 19% VAT when building a home for their primary residence.
According to the current law, everyone has to pay 19% VAT on building land.
Indeed, individuals buying a finished housing unit or an apartment for their primary residence have to pay 5%, whereas those purchasing a plot of land to build their home on have to pay 19% VAT charge.
However, with the new bill taking effect (if approved), newlyweds buying land for owner-occupied housing will have to pay the full tax rate, but 14% of the VAT imposed on the value of the land will be returned back to them in the form of a grant. Ultimately, they will only pay 5% of the VAT instead of 19%.
Meanwhile, the lawmakers have tabled a legislative proposal aiming to eliminate the current distortion where certain real estate buyers have to pay property transfer fees while others don’t.
Currently, when an individual buys a new property and pays VAT charge on it, they are not subject to transfer fees, whereas those transactions involving a land lease have to pay the transfer fees.
In order to end the distortion in the market, the proposal offers non-payment of transfer fees for rentals or leases of immovable property when the individuals involved already pay VAT on taxable business activity.
After the VAT on building land was passed late last year, parliament brought new regulations specifying which type of development would be subject to the tax (protected zones and farming land were exempted).
For more information about buying your first home, contact the team on +357 25 31 31 81 or visit www.ipncyprus.com