The MPs raised a series of questions which the Ministry of Finance undertook to answer
In the decision to bring the bill for the reduced VAT of 5% on the main residence, for social purposes, in whatever form it will take then, to the Plenary Session of the Parliament on June 8, the Parliamentary Finance Committee reached its session on Monday, which at the same time, he submitted a relevant proposal to the Ministry of Finance to verify whether it can be accepted by the European Commission in order to stop the infringement procedure against the Republic of Cyprus.
The proposal reached by the Finance Committee in a closed-door session and which, after the Commission's response, will be re-evaluated by the parliamentary parties separately to each take their final position, before being taken to the Plenary on June 8, provides for a reduced VAT of 5% for houses and apartments worth up to 350 thousand euros and up to 150 sq.m.
Also, provides for from 150 sq.m to 200 sq.m and a value of up to 475 thousand euros, VAT 19 % and over 200 sq.m. VAT 19% for the entire value of the property.
During the Committee's session open to the media, the MPs raised a series of questions which the Ministry of Finance undertook to answer and which concern, among other things, whether the separation between houses and apartments can be abolished, whether the number can be varied of square meters, whether there is a possibility of increasing the amount for reduced VAT for large families, whether transitional provisions should be put in place and whether provision for renovations should be included.
The government bill which is before the Finance Committee provides for apartments, 5% VAT for the first 90 sq.m. and total area up to 110 sq.m. and apartment value up to 220 thousand euros while for residences, VAT 5% for the first 200 sq.m. and total area up to 220 sq.m. with a home value of up to 385,000 euros.
A representative of the Ministry of Finance stated that within the framework of the European directive and the adjustments made by the Commission, a bill could be accepted which includes at least two criteria and is supported by data.
He said that the Commission stated that no member state has only one criterion, e.g. the value of the property, and he added that based on actual data from the applications submitted in 2022 and the first four months of 2023 to the Tax Department, it covers 77% of homes worth up to 350,000 euros.
He added that in its letter of July 15, 2021, the Commission refers to decisions of the European Court that are binding on the member states.
Also, the representative of the Ministry of Internal Affairs, citing data from 2021 from the register of approved applications for a reduced VAT rate, regarding the number of sq.m., stated that up to 100 sq.m. covers 35% of homes, from 100-140 sq.m. 17% is covered, from 140-200 sq.m. 31% is covered and from 200-275 sq.m. 11% is covered.
In his statement, Tax Commissioner Sotiris Markidis expressed the opinion that as a safety net, a time window should be set in which someone can submit an application in order to benefit from the reduced VAT rate that amounts to up to three years after the application for issuance is submitted urban planning permit or the installation in the house.
Regarding the possibility of tax evasion, Mr. Markidis said that the entire electronic system that is built with the involvement of banks also limits tax evasion, while he added that the criterion of square meters should be included in addition to the value of the property so as to increase the possibility “to be more easily accepted” by the Commission.
The President of ETEK Konstantinos Constantis asked for an increase in the square meters. as far as the 125 sq.m. apartments are concerned. and to be connected with the composition of the family and raised the need to simplify the procedures and also the adoption of a reduced VAT of 5% for renovations and additions to existing homes.
He said that in Cyprus there are more than 35,000 unoccupied units and “an aging building stock and we have to find a way for these units to enter the market, given that there is a problem with high rents and securing home ownership”.
< p>“It could also be adopted that the renovations do not concern only the first residence. Renovations of any kind are the most sustainable thing in Europe,” said Mr. Konstantis, who asked for citizens to be able to upgrade their existing building stock.
The President of the Association of Architects Alkis Dikaios said that the association sees positively the provision for a period of 4 months for the submission of the application for a planning permit and added that the proposal for a period of three years for the submission of an application to the Department of Taxation is also acceptable to the association for VAT, from the day of submission of the application for planning permission. It was introduced as the bill also includes the renovations.
The President of the Association of Real Estate Appraisers, Polis Kourousidis, requested that there be simplicity in the bill and that it does not include square meters as well as the non-separation of houses and apartments.
He also referred to the association's proposal for a 5% VAT for properties up to 350 thousands of euros and with a maximum value of 500 thousand euros and with a maximum area of 220 sq.m.
In statements after the session, the President of the Commission, Christiana Erotokritou, said that “we inherited the problem that was pointed out by the European Commission from June 2021” and added that during the discussions in the Commission, suggestions and proposals were made, concerns were filed which “they seemed very helpful so that we could arrive at a framework, some new proposals that would possibly meet the criteria we must meet but stop the infringement procedure that has been initiated by the European Commission against the Republic of Cyprus”.< /p>
“We have agreed in the Finance Committee that the bill will be taken to the Plenary on June 8” to create a new legislative framework which “will be much more varied and much more expanded than the original one tabled by the previous Government in January 2022”, added.
Ms Erotokritou said the aim of the new parameters “is to give as much protection and incentives as possible and to cover as much as possible the vulnerable groups, the middle class and young couples who wish to own their own home within logical financial frameworks but also within logical frameworks of square meters”.
“In this direction, all the parties including DIKO, we all come to the position and opinion that some compromises must be made in order to reach a common recommendation without going beyond principled positions and without misrecognizing the reality that exists in the KD and the difficulty faced by Cypriot citizens and especially young couples in obtaining housing”, he added.
DISY MP Savia Orfanidou said that DISY's position is to find compromise solutions to such an important issue that will define the future of the middle class, the construction industry and investment and rational and environmental planning and added that “a unanimous decision by the Parliament will strengthen our position before the European Commission”.
“Today, we DISY clarified that in any case we cannot accept the separation of apartments and houses”, he said and added that “apartments are increasingly becoming the most affordable option for the lower and middle classes, whom we all have to support more”.< /p>
He also mentioned that such a separation creates enormous distortions, among others social, urban planning and environmental, and expressed the hope that this would be accepted by both the Government and the other political forces.
Ms. Orfanidou said that DISY is ready to contribute to the conclusion of a unanimous decision and added that DISY is not willing to continue this separation between houses and apartments.
AKEL Member of Parliament Andreas Kavkalias said that “what is requested is that logic and responsibility prevail” and added that for AKEL what is requested “remains a correct and fair arrangement under the circumstances, an arrangement that mainly protects the lower and middle social strata and from the another to close loopholes that remain open and allow transactions worth millions to purchase luxury apartments to be granted the reduced rate of 5% VAT”.
Elements, he continued, that were missing from the approaches of the previous and new Government which we do not find in the government bill as it is currently submitted.
Mr. Kavkalias said that it was found that there is no agreement between the Government departments either, adding that “we heard that the Department of Urban Planning and Housing for the first time participates in the discussion of this bill” and “we heard the Tax Commissioner strongly disagree with existing regulations in the bill, in the separation of house and apartment and in the transitional provisions”.
He mentioned that since 2019, AKEL submitted a proposal for a law that defines a ceiling on square meters but also values per square meter and “our proposal ensures the issue of renovation and extension of the reduced rate” and added that all this and more “we expect even now the Government should submit an opinion and deal with them responsibly”.
“I hope by Monday we will see a Government standing up to its responsibilities in a responsible way”, he added.
Speaking during the Committee session, ELAM MP Sotiris Ioannou said that at the first Committee session on the matter a year ago “all of us aimed to avoid a reduced VAT rate on towers, apartments of millions and other similar cases” and added that this does not mean that “we should punish those who are served by social policy”.
“The social policy is not only for the vulnerable but is also made for those with many children, young couples and for people who want to build their lives in this place”, he said and added that ELAM wants there to be “as little as possible restrictions is possible and we believe that the fewer restrictions there are, it will entertain the concern of the Tax Department that transitional provisions will not be needed' or that these provisions will not be so large.
Besides, in a statement after the session, the President of EDEK, Marinos Sizopoulos, said that the acquisition of a residence for Cypriot data is one of the most important social policy measures and “for this reason any regulations regarding the determination of VAT on the first residence , they should essentially strengthen social justice, promote social equality and above all not strengthen the low birth rate which is one of the biggest problems facing our country”.
He mentioned that EDEK submitted specific proposals and we are willing, as he said, “to have a positive role in the mediations that are taking place, in order to reach a final proposal that can serve the above principles, but at the same time not undermine the investment program of our country, not to promote the underground economy, because the revenues of the state are very important to support social policy”. of EDEK said that some consultations took place, adding that “it does not mean that the consultations resulted in a final, joint proposal and decision”.
“We consider that with our attitude and our position, our proposals, we contribute to the formation of the best possible proposal for our country and for our people”, he said and added that “it seems that a positive climate has now been found in members of the Finance Committee and between the parties, who will be able to support the best proposal under the circumstances”.
He stated that “there will be some concessions, as long as these concessions are not at the expense of the authorities” to which he referred and added that the proposal of 2017 was a proposal of EDEK, which was adopted and voted by the Parliament and was the proposal that provided for 5% VAT on 200 square meters and 19% VAT from 201 square meters and above.
Mr. Sizopoulos also said that the final proposal adopts several elements from the EDEK proposal.
The MP of DIPA – Cooperation of Democratic Forces Alekos Tryfonidis said that DIPA tabled an amendment which is close to the Government's bill, i.e. an increase in the value of houses from €385,000 to €400,000, an increase in the value of apartments from €220,000 to €275,000 and “the transitional period should be counted with the filing of the urban planning application so as to cover the citizens who are already in the process of being notified for the purchase or construction of their first home”.
“With the proposals of the Democratic Party – Cooperation and based on the data of the Ministry of Finance, 70% of the Cypriot people who want to build their first home are covered”, he said and added that DIPA requested data from the Urban Planning Department on how much time is needed that the planning permits be issued because they seriously affect, as he said, the entire development of the place and whether the announcements of the previous government with the limits they have set for the issuance of planning permits depending on the development are implemented.
The Mr. Tryfonidis also said that as a measure of support for large families, the 15 sq.m. which the bill provides for each child over 3, must also be matched with the corresponding value of the residence.
Finally, he said that DIPA will work “consensually and constructively, but in a short period of time so that on June 8 we can vote on this legislation which is so important for the development of the country but also for the protection and support of young couples”.
The MP of the Environmental Citizens Cooperation Movement Stavros Papadouris asked that party and political expediencies be left behind and added that it is unnecessary to separate apartments and houses which would lead some population groups to pay the 19% VAT.
He stated that today he clarified that the transition period will be the period during which “someone will apply for the planning permit and not the issuance of the building permit” which was provided for in the original bill.
“We will give one last chance to Ministry of Finance after listening to the reservations we have,” he said and added that “we gave an informal proposal” as a Committee to the Ministry of Finance and the whole issue will be brought to the Plenary on June 8.
Mr. Papadouris said that the intention of the Movement “is to end up with a simple clear and clearly applicable formula that is also fair”.
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