The Cypriot Parliament approved yesterday amendment of the legislation referring to the imposition of the reduced rate of Value Added Tax (VAT) of 5% on the supply or construction of a residence based on the following conditions:

1. The buildable residential area should not exceed the 190 sq.m. AND
2. the total value of the transaction should not exceed €475,000

If both conditions are met then:

• the first 130 sq.m. of buildable residential area with having a maximum value of €350,000, (calculated on the basis of the selling price of the transaction) will be subject to the reduced VAT rate (5%).

The law approved by the Parliament also provides that in the case of persons with disabilities the reduced VAT rate (5%) is applied for the first 190 sq.m (not the first 130 sq.m. which is applicable to persons without disabilities) of buildable residential area.

The amendment also provides for a transitional period, so that the new provisions will not be applied, in cases where a planning permit has been secured or an application has been submitted to secure a planning permit within four months of the entry into force of the proposed law.

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