Cyprus Council of Ministers approved on Wednesday the reduction of the immovable property tax rate by 50% and abolished the immovable property tax collected by municipalities and communities.

“Today we made another important step towards tax reform and reducing the tax burden for households and corporations,” the Minister of Finance Harris Georgiades said following a Council of Ministers meeting.

He said the government approved a reduction of the immovable property tax by 50% to 0.5 per mille offsetting the obligation by the EU to charge VAT rate of 19% on transactions of property in the context of commercial transactions of buildable land.

Georgiades said the estimated revenue from the 19 VAT is €24 million whereas the revenue loss from the reduction of the immovable property tax is estimated to €45 million.

This reduces tax revenue from immovable tax from 103 million to 45 million, he said adding the tax break amounts to at least €58 million.

Furthermore, Georgiades said the Council of Ministers decided to maintain the 20% discount on citizens who timely repay their immovable tax via the internet or through credit institutions and the 17.5% discount for citizens pay their immovable property tax on time at the Tax Department counters.

Immovable tax up to €25 will not be collected, the Finance Minister said.

Georgiades also said the government reduced the transfer fees by 50% for all immovable property sales.

“With this proposal, that will be submitted to the parliament the soonest possible, I believe we are taking another step towards reducing those burdens that have been rendered necessary in the previous years,” Georgiades said.

The proposal`s total fiscal impact is estimated at 0.2% GDP, he added.

Georgiades explained the 19 VAT is imposed on a plot sales by a land developing companies and not on transactions by natural persons.