AKEL has introduced a legislative proposal to eliminate the 5% reduced VAT rate for international buyers purchasing or constructing homes in Cyprus.

MP Giorgos Loukaides has put forward an amendment to the Value Added Tax Law, which aims to prevent individuals from non-EU countries from enjoying this lower tax rate.

The proposal argues that the tax concession has been improperly exploited, resulting in undue advantages for foreign purchasers.

Originally intended to support families with moderate and lower incomes, the reduced VAT rate has instead facilitated significant property acquisitions by foreign nationals, fueling an increase in housing prices and making it increasingly difficult for local residents to secure affordable homes.

The proposal suggests that abolishing the tax reduction would aid in stabilizing property prices and alleviating the housing shortfall. Additionally, it is aimed at minimizing the financial shortfall for the government.

Support should prioritize those genuinely in need rather than foreign buyers.

Mr. Loukaides emphasized that recent years have seen a surge in property acquisitions by foreigners, notably affluent investors and highly paid professionals, in Cyprus. This trend has exacerbated the housing crisis by escalating demand and property prices.

He noted that AKEL MPs have brought these issues to light in the Parliamentary Interior Committee. As a step towards resolving the problem, the party has now formally suggested discontinuing the reduced VAT rate for international buyers.

Loukaides outlined the objective of ensuring that tax incentives are reserved for those genuinely requiring assistance. He criticized previous and current administrations for overly wide application of the tax cut, allowing it to be used in ways that disadvantage local buyers.

He stressed that VAT reductions should serve as a governmental social policy tool to aid families with modest and average incomes, rather than serving the interests of foreign investors. He asserted that the government has too long favored affluent investors over ordinary citizens battling to find affordable housing.