The Progressive Party of the Working People of Cyprus (AKEL) has introduced a new bill for parliamentary review. This proposed legislation aims to eliminate the preferential value-added tax (VAT) for foreigners when acquiring their first property.
Current Situation
Currently, purchasers of property on the primary market are required to pay a value-added tax to the government. There are two VAT rates in Cyprus: a standard rate of 19% and a preferential rate of 5%. The lower rate is available only to individuals.
Both Cypriot citizens and citizens from other EU member states or third countries can benefit from the 5% tax rate when buying a home, provided that the residence is their primary dwelling in Cyprus for a minimum of ten years post-purchase. Rental of properties bought at this preferential rate is prohibited.
For further details, refer to the article by Europa-Cyprus titled “VAT on the Purchase of the First Property in Cyprus: When to Apply 5% versus 19%.”
AKEL's Proposal
The bill, put forward by MP Giorgos Loukaides, seeks to revoke the right of third-country nationals to access the preferential tax rate for any property purchase.
According to the explanatory note, rather than assisting Cypriot families with moderate and low incomes, the preferential VAT has encouraged significant property acquisitions by foreigners, leading to increased property prices and diminished housing accessibility for residents.
AKEL contends that abolishing this tax benefit will help regulate property prices in Cyprus and avert further housing shortages, while also boosting state income.
Loucaides asserted that tax incentives should be reserved for those genuinely in need of assistance. He criticized past and current administrations in Cyprus for applying the reduced tax rate too liberally, disadvantaging local buyers.
He underscored that VAT reductions ought to be part of a comprehensive social policy designed to support low- and middle-income families, rather than prioritizing foreign investors. Loucaides believes that the government has long favored affluent foreigners at the expense of everyday Cypriots.
Foreign Purchasers of Cyprus Property in January 2025
- Data from the Cyprus Land Registry indicates that 1,275 real estate transactions (including houses, apartments, offices, commercial properties, and land) took place in January 2025. Of these, 510 transactions (40%) involved foreign buyers. Specifically, 347 contracts (68% of all foreign transactions) were signed by third-country nationals, while 163 (32%) were by citizens of other EU countries. Compared to January 2024, the number of property sales to foreigners grew by 12%. In January 2025, foreign purchasers primarily targeted properties in Paphos (36%), Limassol (28.7%), and Larnaca (21.8%).