Insider
The issue of VAT on real estate is something that touches almost the entire population, the Pancyprian Association of Land Development and Construction Entrepreneurs notes in an announcement.
Specifically, they note that “As the Association of Entrepreneurs for Land Development and Construction we consider that the bill that is promoted in Parliament and concerns the amendment of the Law on Value Added Tax with the imposition of reduced VAT, 5% on the delivery or construction of housing, which will cover the first 140 sq.m. .μ. of the house, instead of the first 200 sq.m. main and permanent residence as it happens today, is moving in the wrong direction. “This amendment will make conditions more difficult for prospective property buyers.”
Outline:
1. Completed or under construction houses that have an area of more than 200 sq.m., will not be able to be sold to the beneficiaries of the reduced VAT rate.
2. The revision of the already designed or licensed houses in order to be in line with the new data, will significantly reduce the offered product in the market and will create pressures for price increase.
3. From the above it appears that the additional cost that VAT will have for the purchase or construction of a house that is between 140 sq.m. and 200 sq.m., ie 19% of the difference that results in combination with the increases in the cost of construction materials, will lead to a further rise in prices making it difficult to obtain a new home, at a time when more and more Cypriots can not proceed to this step. Such an action primarily affects the financially weak citizens.
As a result, many young or large families will be forced to cancel their plans and limit their purchase to homes with fewer square feet. In this way, home ownership becomes a privilege for those who can pay the extra VAT.
4. This decision is contrary to the government's attempt to attract foreign investors, with projects such as the Headquartering program, as it significantly increases the cost of foreign investment in the country. Especially when other European countries have much lower VAT taxes on residential real estate.
Finally, they report that in a period like the current one, where the economy and society are struggling to recover by mitigating the pandemic losses, we estimate that this proposal will work in the opposite direction. What the place really needs are incentives that will boost economic activity and investment, but also facilitate our financially weak fellow citizens, who plan to acquire their home.
