Parliament approves extension for 5% VAT rate on primary residences

The Cypriot Parliament has approved an extension regarding the transitional provisions for the 5% VAT rate on the purchase or construction of a primary residence. Originally scheduled to expire on June 15, these provisions allow taxpayers who submitted planning applications between June 2023 and October 31, 2023, to benefit from the lower rate. The legislation was fast-tracked by parliamentary parties, with the exception of AKEL, shortly before the end of the legislative session. Critics and some reports suggest the timing of the proposal, filed at the last minute without deep discussion, was influenced by political considerations ahead of upcoming elections. There were initial concerns raised by the Finance Committee that the original extension proposal until June 2027 could violate European Union directives. Consequently, the government must now decide whether to sign the law or raise constitutional objections based on the principle of separation of powers, as noted by the Attorney General.