Plenary Assembly almost unanimously approved the law
The bill also provides for a summary of welfare, so that in the case of persons with disabilities, the reduced VAT rate (5%) will be applied for the first 190 sq.m. of buildable residential area.
Almost unanimously, the Plenary of the Parliament approved a law that allows the imposition of a reduced VAT rate. 5% for the first 130 sq.m. first residence, both for detached houses and apartments. 42 MPs voted in favor, while there was also an abstention from the MP of the Environmentalists – Citizens' Cooperation Movement, Alexandra Attalidou.
Specifically, the reduced VAT rate 5% will concern the first 130 sq.m. first residence, both for detached houses and apartments, up to the value of €350,000, provided that the total value of the transaction does not exceed €475,000 and the total buildable area does not exceed 190 sq.m.
The bill also provides for a welfare summary, so that in the case of people with disabilities, the reduced VAT rate (5%) will be applied for the first 190 sq.m. of buildable residential area.
A transitional period is also foreseen, so that the proposed regulations will not be applied, in cases where a planning permit has been secured or an application has been submitted to secure a planning permit within four months from the entry into force of the proposed law.
In a long debate in the Plenary and despite the consensus that existed around the passing of the specific law, there were confrontations between parties about the responsibilities that led to an amendment to the legislation that allowed until today a reduced VAT rate of 5% for the first 200 sq.m. residence.
Speaking to the Plenary, the individual socialist member of parliament Kostis Efstathiou, said that the EU is not only the European Commission and that many times the decisions of the Court of Luxembourg are inconsistent with those of the Commission. Unfortunately, he said, the differentiation of the regulation in Cyprus was done within the framework of the golden passport program, which led Cyprus to lose its moral and legal advantage with which it could negotiate due to its particularities.
< p class="text-paragraph">The President of the Finance Committee, DIKO Member of Parliament Christiana Erotokritou said that this bill, which is the result of deliberations and a serious exchange of views in the Committee, if passed will send a strong message inside and outside Cyprus that there is seriousness and maturity in the political system to discuss and come to a conclusion common denominator in the big and important issues facing the country.
He noted that the content of the bill is the best that could be achieved in the light of the Commission's recommendations and the needs of the Cypriot economy and society.
He said that they greatly improved the provisions of the bill and changed the original position that no transition period was needed, while they changed the original position that provided for the separation of houses and apartments. Unanimously he added, the Commission increased the upper limit from 110 sq.m. at 130 sq.m. and expressed the belief that there is a significant possibility of reaching an agreement on this issue with the European Commission.
Environmentalist MP Stavros Papadouris noted that there is coercion under pressure to pass the legislation, since as he said there was maximum abuse in the past. He noted that in 2016 the House almost unanimously decided on the limit of 275 sq.m. to eliminate it so that everyone benefits from a measure of social policy. But he noted that Environmentalists and the Citizens Alliance did not vote for it and warned of what would follow.
She also said that in 2021 when Cyprus was asked to provide data on the reduced VAT rate to the European Commission, the Tax Department informed her of the previous regime, without informing her of the change. He added that in 2021 the Commission, after realizing what preceded it, sent the first letter for infringement proceedings, stating that the CC did not observe the principle of good faith cooperation. Mr. Papadouris called it tragic that the requested information was not provided. He also said that having a burdensome past as a state, this discussion started very difficult with very limited negotiating power of the Ministry of Finance.
He noted at the same time that for the sake of unanimity he will support the bill for the 130 sq.m. to give a positive message for the evaluation of the country, while he expressed satisfaction for changes made to the bill.
The deputy of DIPA – Cooperation, Alekos Tryfonidis, said that the cordon is tightening due to the violation procedure, while he expressed a strong protest about the result of a compromise. The final bill, he said, was not what they were after, even though it is improved. He noted that they will vote for it after many of their reservations and concerns have been satisfied.
He also spoke of the responsibilities of some for the point to which things have been led and of poor implementation of the legislation he favored mainly the high income strata. He noted that the 130 square meters is grossly unfair to young couples who want to acquire a luxury residence, while he noted that the issue of renovations and extensions remains a gray area.
He also noted that despite the increase of 15 sq.m. which exists for each child from the third child onwards there is no increase in value. He stated that they will vote in favor of the bill despite the reservations, enabling the Ministry of Finance to negotiate and agree on the 130 sq.m.
EDEK MP Ilias Myrianthous said that here and a year and a half this marathon has started to be able to close this issue which unfortunately is a compromise from all sides.
He said that with the passing of the bill, the process should be restarted by the staff of the Ministry of Finance in order to collect again from the beginning the real statistical data which should be submitted to the Commission for review and implement a plan that will not have distortions.
We expect, he said, that in addition to the specific bill, the Government will bring an additional bill to extend the housing policy to the low income strata, in order to support those who will be wronged.
The President of EDEK Marinos Sizopoulos noted that the co-formulation of the final proposal is important, despite the fact that serious disagreements have been expressed on the part of his party. He stated that he supports it, in the context of consensus and constructive synergy.
Mr. Sizopoulos said that it will become more difficult for young couples to acquire housing, especially in certain areas such as Limassol, and the underground economy will be strengthened, something that will be at the expense of the economy and state revenues.
He also mentioned that the construction sector is essential for the economy, but the specific issue is in the form of housing policy and the increased cost of construction must also be taken into account when issues such as anti-seismic upgrading, energy efficiency and others.
ELAM MP Sotiris Ioannou stated that despite the fact that the current text is not satisfactory to the extent that the party would like, it is improved in relation to the one submitted by the Ministry of Finance, as well as to its original proposal.
< p class="text-paragraph">He expressed satisfaction at the integration of the transition periods which covers the citizens who started the process and does not burden them with bureaucracy and delays. He also stated that the values included in the bill respond to a satisfactory degree to the increase in building materials, noting that unacceptable values were heard from the competent authorities who called on them to accept.
He stated also that the Ministry of Finance did not convince them at all about its efforts to reach a correct and fair solution together with the parties and called on it to support with all its strength what will be voted on.
AKEL MP Aristos Damianou stated that how we got here is not the result of legislation that was passed, but the result of the “plunder” made with the golden passports by the previous Government. This, he added, led to them being embarrassed and not being able to legitimately claim reduced VAT, while he noted that they did not file a single page of his correspondence with the Commission.
He added that from 2017 to 2019 they warned that reduced VAT should not be given to oligarchs and told them nothing to blame. He added that from 2019 they filed a law proposal claiming social criteria in the reduced VAT rate.
He also said he wants to believe that now the 130 sq.m. which are a retreat for AKEL have now been secured, while he noted that the victimization of families with 2-3 children continues, for whom the 19% VAT is not an insignificant amount. They vote, he said, with soul pain saving the minimum before the risk of losing the maximum.
DISY MP Haris Georgiadis spoke about a proposal that does not fully satisfy his party but said that a compromise was reached. Our position, he said, is not exactly the one reflected in the text, but we maintain a responsible and consistent attitude and will not insist on the complete and absolute satisfaction of our own positions.
He criticized Mr. Damianou for his positions earlier, saying that he did not resist the temptation and is trying to distract attention from the legislation because it was with their own participation and suggestion that foreigners and third-country nationals became beneficiaries.
He admitted that the 2016 decision was wrong but DISY does not play the blame game and recognizes that today there must be a correction. Mr. Georgiadis said that an EU member state cannot regulate VAT at will and it is our duty to attempt better harmonization with the European directive. But he also sent a message to the Commission that it is not reasonable to persist beyond what is necessary. As a member state, he pointed out, we know our responsibilities but also our rights and we believe that by regulating the 130 sq.m. full harmonization with the European directive is achieved.
In response, Mr. Damianou noted that someone who has served for seven years as a Minister of Government who issued passports should be placed “more humbly”. He noted that the previous Government, with the decision to recover 40 million euros in relation to the passports, shows that it was giving where it should not have been. He also noted that in 2016 Mr. Stefanou had expressed his disagreement with A. Neophytou's proposal that changed the VAT targeting of 5% which was done for social reasons.
Mr. Georgiadis noted that despite his disagreement, AKEL voted for the amendment and it was AKEL's vote that opened the window for foreigners in 2012.
The President of DIKO Nikolas Papadopoulos stated that the party also voted for the amendment and takes its share of responsibility, admitting that they should have been more cautious. At the same time, he welcomed the spirit of consensus for a compromise that does not satisfy anyone but will solve the problem. He noted that the difference between the current Ministry of Finance and the previous one is that he took over a problem that had been pending for three years and is now being resolved within three months, admitted that the figures were wrong, tried to cooperate with the Finance Committee and pledged to defend before of the institutions the proposal that will be upvoted.
AKEL General Secretary Stefanos Stefanou spoke of an achievement with today's proposal saying that this does not mean that we are erasing the entire history that has a long journey to get here today.
In response to Haris Georgiadis, he said that AKEL then voted the way it did, because it was obliged to look at the big picture and not victimize them many. He added that the former President Nikos Anastasiadis took a program that was started by the Tassos Papadopoulos Government and continued under Dimitris Christofias with very specific criteria to help the economy, and “overflowed” it with 7,500 passports “and now you are trying to burden others with responsibilities that you have”. He stated that “this fairy tale will finally have to end”.
