Cyprus: €500m lost revenue in past five years from reduced VAT rate on main residence

Cyprus lost some €500 million in revenue in the past five years from the 5% reduced VAT rate on the supply or construction of a dwelling to be used as the main and permanent place of residence.

This is what Philenews reported on Friday, citing tax expenditure analysis reports accompanying state budgets.

The specific revenue loss was recorded between the years of 2018 and 2022 during which more than 14,000 taxpayers benefited from the incentive.

This includes very wealthy foreigners who took advantage of Cyprus’ controversial citizenship by investment plan which is now banned.

Undoubtedly, the money lost by the state from this tax exemption – which was generally applied without any income or social criteria – is a lot more considering that  the above-mentioned figures refer to only a specific period of time.

The recently amended law on this provides that the reduced VAT rate of 5% applies to the first 130 m2 of buildable residential area of a property and for the maximum value of €350.000.

Provided, however, that the total buildable residential area does not exceed 190 m2 and the total value of the transaction does not exceed €475.000.