New Legislative Extension Addresses Permit Delays

Cyprus authorities have extended the transitional framework allowing a reduced 5% VAT rate on the purchase or construction of a primary residence. The measure enables homeowners and developers to continue benefiting from the lower rate, subject to approval by the Tax Office, until the end of 2026.

Parliament Acts To Mitigate Administrative Setbacks

The decision was approved on Thursday, with Parliament granting a 6.5-month extension in response to delays by local planning authorities in issuing building permits. The vote passed with 24 in favor and 15 against, with opposition coming from the AKEL faction.

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Originally introduced three years ago, the transitional scheme applied to applications submitted between June 2023 and October 31, regardless of project completion timelines. The previous deadline had been set for late June 2026, making the extension critical for pending cases.

Extended Application Period And Key Provisions

Under the revised framework, the Tax Office now has until December 31, 2026, to process applications. This adjustment reflects administrative bottlenecks that slowed earlier reviews. Eligible applicants retain access to the 5% VAT rate on the first 200 square meters of a primary residence, regardless of the total property size.

Earlier rules applied stricter thresholds. The reduced VAT covered only the first 130 square meters for properties valued up to €350,000. For homes between 131 and 190 square meters with a value cap of €475,000, a mixed rate is applied, combining 5% and 19% VAT.

Reactions From Political Leaders

Christiana Erotokritou, Chair of the Economic Committee and DIKO member, stated that delays in permit issuance made the extension necessary. According to her, the measure prevents additional costs from being passed on to buyers.

Stavros Papadouris from the Ecologists faction noted that the European Union had already approved the transitional framework in 2023. He highlighted that many applications were submitted on time but remained unprocessed due to administrative delays.

George Loukaidis, representing AKEL, acknowledged the rationale behind the extension while reiterating concerns about potential misuse. His position reflects broader opposition to allowing low-quality developments to benefit from favorable tax treatment.

Outlook

The extension addresses regulatory delays while preserving access to reduced VAT rates for eligible applicants. This outcome provides temporary relief to both developers and homebuyers as authorities work through existing backlogs.