The need to set schedules for the completion of the audits carried out by the Tax Department in terms of the payment of taxes related to transactions made in the context of naturalization, expressed before the Parliamentary Audit Committee the Minister of Finance Konstantinos Petridis.
On behalf of the Tax Officer Giannis Tsagaris stated that the Department is in the final stage of recording all 3,000 naturalization applications, while emphasizing that currently, for VAT purposes, there are 80 providers (out of a total of 245) who control 80% 77% of naturalizations, while he announced that the first phase of the surveys concerning the first 40 providers “we estimate to be completed by the end of March”.
In addition, the Tax Officer, after noting that audits are done for those who did more than four naturalizations, said that under control are 10 land development companies, three in each province, that made good transactions, in value, noting that no audit has yet begun. for the 60 adults, as in order to declare tax profits, as he said, 90% of the project they are constructing must have been completed, according to the 1987 legislation.
At the same time, the General Manager of YPOIK George Pantelis said that 6 billion euros entered the country through the Cyprus Investment Program by investors mainly from Russia, Ukraine and China.
As stated by the Minister of Finance, before the members of the Committee, who discussed ex officio the audits carried out so far by the Tax Department in the law and audit offices that provide services under the Cyprus Investment Program (KEP), following a proposal by MPs Charalambidou, Stefanou Stefanou, Skevi Koutra Koukouma and Giorgos Perdiki, “instructions have been given to conduct strict audits by the Tax Department to ensure the public interest in terms of tax collection” (Extraordinary contribution for defense and defense, income) relating to naturalization transactions.
“We have to give a timetable for the next few days, how the audit program will start and when it will be completed,” he added.
Mr. Petridis also said that the audits focus on two categories of people, that is, one that concerns people who sold a property, but also the second that concerns those who received a commission, whether they are providers or are involved in the provision of services for completion. of naturalization.
“Based on our instructions, we had to start with the big ones, so that depending on the volume we have more reliable data” until the completion of the control of all providers, he noted.
Regarding VAT, Mr. Petridis said that recently the European Commission confirmed that Cyprus is in full compliance with the European acquis on the issue.
The Minister clarified that when it comes to buying a first home, the VAT is 5%, regardless of whether you are a foreigner, a Cypriot, a woman, a man, a naturalized person or if you have another residence.
He stated that he is fully aware of the Parliament that passed the legislation regardless of income or property or anything else and added that it is also on the initiative of the Parliament that was extended to people living in third countries and not the executive power, which limited the right to Cypriot and European citizens.
He also said that VAT is also an EU asset and the EU is very strict on VAT losses and the question is how many have used this right for other business purposes and for what benefit.
The Tax Officer Giannis Tsagaris said that we started first from the control of VAT payment because we want to look transaction by transaction, while noting that the taxes that will be examined are the extraordinary contribution for defense, VAT and income tax, emphasizing that the most important is to determine the type of activity.
“Whether it is supplies for the sale of real estate or other things or the provision of services, we can have all this in front of us,” he underlined.
“We are in the final stage of registering all naturalization applications, which amount to about 3,000,” he said, adding that the audits were started by about 245 providers, noting that “at an advanced stage” for the VAT part are 40 audits of the most large providers, and then we added another 40 providers.
The Tax Officer said that at present 80 providers are under control (out of a total of 245) who control 80% of the naturalization applications and 77% of the value of the applications.
He said that the audits started last October and the first phase of the investigations concerning the first 40 providers “we estimate to be completed by the end of March” and the audits of the remaining 40 will continue.
He said that the audits are carried out by 30-35 officials of the Department and stressed that it is not a matter of number of staff, but of knowledge.
Mr. Tsagaris referred to three different ways, which can be characterized as a service (legal, due diligence, advice) by each type of provider (lawyers, accountants), which are taxed differently and added that the Tax Department characterizes all “administration services “, Which are” taxed in Cyprus “and which are provided” to naturalize a person “.
“We also know policy offices that when you make a primitive assessment, these services will exist without VAT being charged,” he noted.
Regarding the issue of companies of land development companies, Mr. Tsagaris said that the problem with these companies, in relation to the income tax where their expenses will be revealed “is the way of taxation that is done with a 1987 circular” the which “says you do not pay tax if you do not reach 90% of the completion of the project.”
He added that an owner of this type of company if his project reaches 4 years to be completed to 90% “then he has an obligation to include in the tax return” the project.
Mr. Tsagaris said that the Department knows how these companies work and added that the largest of these companies had offices abroad “and most of the commissions paid by the older ones are in offices abroad”.
Regarding the inspections in the big land development companies, which sold most of the passports, Mr. Tsagaris, after noting that the inspection started from the small ones, said that the Department has not checked the 60 big ones yet, “because their projects are ongoing for too long their tax returns have been almost zero ”in relation to tax profits.
In addition, the Tax Officer said that under control are 10 land development companies, three in each province, that made good transactions, in value.
Those countries that have signed an exchange of information through CRS are checking the data sent to us by the countries, but “I can not ask for data for the tax residents of my country”, he added.
Regarding the law firm named after the President of the Republic, Mr. Tsagaris said that “so far, there is nothing reprehensible”, but the audit is not over, while he added that there are RIP offices which, at first sight “They look suspicious, but if the audit is not over, I can not say for sure.”
He added that the commissions received “are embedded in the cost of sales, in accounts which if you do not have competent officers you can not locate.”
Mr. Tsagaris also said that the charges for the provision of services by providers range from 30,000 euros and can reach up to 100,000 per application, while he noted that the commissions started from 10% in the value of the property and reached 20% due to the great competition between of land development companies.
Auditor General Odysseas Michailidis raised as a first issue whether those providers submit the formal part of their tax return, adding that an audit by EV found that of the 15 largest providers, one did not file a tax return for the years 2017 and 2018, while two for the tax year 2018 that he had to put until March 2020.
Regarding VAT, Mr. Michailidis said, among other things, that the issue is whether or not it falls within the scope of the exemption of the first residence for private purposes and added that EV's position is that it is not entitled to receive the reduced VAT of 5%.
He also stated that EV found it impossible to make an adequate check whether someone bought with his passport or identity card or if his wife bought it.
Mr. Michailidis also said that another issue concerns the tax audit of the providers and added that EV found – which is also a finding of Kalogiros conclusion – that the purchase value of real estate under KEP “is about twice its real value”, ie the investor bought it in double the amount, which went into the account of the land development company.
He said that the company's options after the sale at double the price were either to show profits and be taxed “or an intermediary to suggest that he send part of the amount to the Seychelles or Malta which will be recorded in the books by the land development company. as an outlet for services to a company.
In statements after the session, AKEL MP Irini Charalambidou said that “our concerns were fully confirmed, so we registered this issue today”, adding that while the Tax Officer was announcing that he was conducting audits, the reality is that none of the big divas it is not under his microscope. “
“It is important to check the big developers that we all know who are for the cooperation they had with other providers or brokers in order to sell the 2 million euro apartments,” he said, adding that “they gave commissions through banks and often ended up in foreign bank accounts “.
Ms. Charalambidou said that “if the Tax Officer really wanted to be effective, he could start with the big developers, see who was giving the supplies and check those who were receiving the fees whether they paid a legalized tax”, while he greeted the fact that “the Minister of Finance has clearly stated that the audit must be done especially for adults and for this purpose he will set schedules to ensure that the Tax Department will complete within the framework of the economy the work it is required to complete.”
He stated that we can not start from the small and leave the big ones, who often have political influence with the result that they are never controlled “and added that” this is where we were in 2013 and we find them today “.
He also said that “the excuses made today by the Tax Officer to the committee are not correct” and added that “the towers have been completed, the real estate has been delivered and the commissions have been paid”.
“All the Tax Commissioner had to do was control the flow of money through the banks and he did not do that. It should therefore stop pompous statements that checks are being made. “The quality of the controls is important and who is being audited”, he concluded.
Besides, the independent MP Anna Theologou said that “a part came out of the discussion that the Minister and the Tax Officer very easily avoided discussing and concerns not only the control of nationality providers, lawyers, auditors and developers, but also the risk of challenging the decisions of the Tax Officer regarding the audits that will be completed “.
“And that lies in whether the Republic will be able to collect what the Comptroller deems to be receivable during the audit because due to the decisions of the Supreme Court for the unconstitutional appointment of the Comptroller, its decisions can be challenged by all of them. the big businessmen, the law and accounting firms and the developers “, he added.
Ms. Theologou said that this issue is “very serious not only for the revenues that the Republic has lost through the program but also the revenues that the Republic will lose because the proper procedures for the appointment of the Tax Officer are not followed.”
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