The European Commission has sent a new written ultimatum over the amendment – within two months – of Cyprus’ legislation on reduced 5% VAT on the purchase or construction of a main residence.
And authorities are trying their best to gain time so that the Mediterranean island avoids being referred to the EU Court of Justice for a fine.
The EU directive dictates that member states introduce legislation of 5% VAT on homes up to 140 square metres.
In Cyprus, the reduced rate of 5% VAT applies for homes up to 200 sqm of buildable area.
The parliament and real estate stakeholders claim this would endanger the recovery of the construction sector and the wider economy.
However, Cyprus now has up until February 15 the latest to amend the existing legal framework.
The Commission warned that, otherwise, a prolonged delay in passing the government’s proposal will likely lead to their decision to move to the next stage of the infringement procedure.
Insiders said that from time to time the Cypriot authorities had asked Brussels for time credit ad this is something they plan to do now.
